[Clips] U.S. Attorney Opens RSA Options Probe

--- begin forwarded text Delivered-To: rah@shipwright.com Delivered-To: clips@philodox.com Date: Tue, 13 Jun 2006 15:38:20 -0400 To: Philodox Clips List From: "R.A. Hettinga" Subject: [Clips] U.S. Attorney Opens RSA Options Probe Reply-To: rah@philodox.com Sender: clips-bounces@philodox.com http://online.wsj.com/article_print/SB115021311199479010.html The Wall Street Journal U.S. Attorney Opens RSA Options Probe A WALL STREET JOURNAL ONLINE NEWS ROUNDUP June 13, 2006 1:56 p.m. Internet-security company RSA Security Inc. faced more questions related to its stock-options grants, as the Justice Department opened an inquiry that comes on the heels of a Securities and Exchange Commission probe announced last month. The Bedford, Mass., company said it received a document subpoena from the U.S. Attorney for the Southern District of New York requesting records from 1996 to the present relating to its stock-option grants. Last month, the company announced a probe by the SEC relating to its options grants. The SEC staff told the company that its inquiry shouldn't be construed as an indication "that any violation of law has occurred," RSA said. The company has declared that it will cooperate with both investigations. RSA was among 32 companies spotlighted in a report by an accounting-research firm, the Center for Financial Research and Analysis. The study looked at options grant dates for the 100 companies that issued options heavily before changes in reporting requirements in 2002 made backdating more difficult. CFRA, analyzing trading patterns, said RSA was among 17 companies with a high risk of "having backdated options," but cautioned that the analysis doesn't prove backdating took place. The CFRA report highlighted options granted to top executives by RSA in 1997, 1999 and 2000 that each preceded major run-ups in the company's share price. RSA is one of more than 40 companies that have disclosed internal or external inquiries into their options practices in the past few months. Investigators are trying to determine whether companies awarded options and then backdated them to a period when stock prices were low in order to make them more valuable. Options give holders the right to buy a stock at a strike price, typically the market value on the day of the award. The options are supposed to give executives incentive to boost the company's stock price so that they will benefit along with other shareholders. But if companies choose dates before the award date when the stock was particularly low, it undermines the incentive because the executives' options are already profitable. Moreover, backdated options affect the tax and accounting treatment of the options, and if they weren't disclosed, they raise the potential for criminal fraud charges. -- ----------------- R. A. Hettinga The Internet Bearer Underwriting Corporation http://www.ibuc.com/ 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' _______________________________________________ Clips mailing list Clips@philodox.com http://www.philodox.com/mailman/listinfo/clips --- end forwarded text -- ----------------- R. A. Hettinga The Internet Bearer Underwriting Corporation http://www.ibuc.com/ 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'