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

[R.A. Hettinga]

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  Delivered-To: rah at shipwright.com
  Delivered-To: clips at philodox.com
  Date: Tue, 13 Jun 2006 15:38:20 -0400
  To: Philodox Clips List <clips at philodox.com>
  From: "R.A. Hettinga" <rah at shipwright.com>
  Subject: [Clips] U.S. Attorney Opens RSA Options Probe
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  <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 <mailto: rah at ibuc.com>
  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'
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-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
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'