CNet Networks Inc. said the Securities and Exchange Commission has issued a formal order of investigation and served subpoenas on several former officers in connection with its inquiry into the company’s stock option grants. It did not name the executives.
The technology-oriented website noted that in May 2006, the SEC launched an informal inquiry into its stock option grants. On June 26, 2006, CNet received a grand jury document subpoena from the United States Attorney for the Northern District of California requesting records pertaining to the granting of stock options.
In its Wednesday filing, CNet said that in May 2007, it learned that the SEC’s probe was upgraded to formal and that the regulator issued the subpoenas to the former officers. The company stressed that it continues to cooperate with the investigations by the US Attorney’s office and the SEC.
In July 2006, CNet warned that it would restate its financial statements to correct errors related to accounting for stock-based compensation from at least 2003.
Last October, it announced that co-founder and chief executive officer Shelby Bonnie had resigned as chairman and CEO. In a separate press release issued about the same time, the company announced that a special committee concluded “there were deficiencies with the process by which options were granted” at CNet, including in some instances the backdating of option grants, during the period from the company’s IPO in 1996 through at least 2003.
The company added that these deficiencies resulted in accounting errors, which the company has previously announced will result in a restatement. It also noted that a number of executives, including Bonnie, the former CFO, and the recently resigned general counsel and senior vice president of human resources, “bear varying degrees of responsibility for these deficiencies.”
In a statement at that time, Bonnie stated: “I apologize for the option-related problems that happened under my leadership. I believe that the company has come a long way since 2003 in addressing these deficiencies, but am deeply disappointed it happened nonetheless.”