RealTime IT News

Feds Eye Bay Area Tech in Options Scandal

The stock option probe already running through the tech industry just grew more legs.

The U.S. Attorney for the Northern District of California is looking into allegations that several Bay area companies abused the practice of timing stock options; something of a tradition in the tech industry.

U.S. Attorney Kevin Ryan and the FBI's office in California's Northern District said today they are forming a local stock options backdating task force that is looking into allegations companies engaged in stock manipulation by changing the grant dates of those options.

If those options helped cook some books, and were done with an "intent to defraud," there could be even more charges, fines, or just plain hell to pay among a widening list of tech companies.

Ryan's statement is sending a clear signal, aimed at the heart of the tech industry, to clean up its practices regarding how options are granted and backdated.

"Falsification or backdating of financial documents may call the integrity of companies' financial statements into question, can constitute fraud on the company, shareholders, and the market, and may give rise to tax violations. We will evaluate the facts of each case, and we will bring criminal charges when appropriate."

The task force announcement joined a growing daily din of companies announcing earnings restatements, or internal probes of their accounting of past options grants, with a large proportion in the tech industry.

Online job posting company Monster.com just announced that it may need to restate financial results for 2005 and prior years as a result of its ongoing stock option grants probe and that it is the subject of three lawsuits as a result of the restatements.

Apple  recently said its own internal investigation uncovered irregularities in stock options granted to executives between 1997 to 2001.

Mercury Interactive, which recently disclosed that its directors may face civil charges from the Securities and Exchange Commission following the company's admission that its former managers backdated stock-option grants, has sacked executives as a result of its probe.

RSA Security  said it received a subpoena from the U.S. Attorney for the Southern District of New York for documents dating back to 1996.