Human Capital & Careers

Costco Subpoenaed over Options

CEO and CFO declined their bonuses last year to acknowledge ultimate responsibility for misdated options and the resulting internal inquiry.
Stephen TaubMarch 19, 2007

Costco Wholesale disclosed that it has received a grand jury subpoena from the U.S. Attorney’s Office for the Western District of Washington seeking documents and information regarding stock-option grants. The company stated that it will cooperate with the inquiry.

Last year, Costco conceded that a special committee had found “imprecisions” in its option-grant process. Chief executive officer James D. Sinegal and chief financial officer Richard A. Galanti declined their bonuses for 2006 to acknowledge their ultimate responsibility for the company’s misdated options and the resulting internal inquiry.

Sinegal would have received a $200,000 bonus and Galanti, $82,000, according to a Costco regulatory filing.

According to Costco’s latest announcement, the retailer’s special committee reviewed option-grant practices from 1996 to 2005. For certain grants, the committee could not precisely determine the appropriate measurement date for financial accounting purposes. However, the committee found no evidence of fraud, falsification of records, concealment of actions or documentation, or intentional deviation from generally accepted accounting principles, Costco stated.