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These options are sure winners, but they aren’t available
for you. Don’t feel alone. Most corporate executives can’t
get these options either.
What kind of options are we talking about? -- An option that
is backdated so that you have a built-in paper profit when
the option is granted. For example, you receive a stock
option in December, but the option is backdated to September
when the price of the stock was lower. Normally, if you
receive an option in December, the exercise price would be
the closing price on the day that it was issued. When you
receive a “backdated” option, you already have paper profits.
It’s a great deal for the corporate executive receiving the
option, but not such a good deal for the Securities and
Exchange Commission, the Internal Revenue Service and
investors.
Few corporations are brazen enough to try such shenanigans.
However it appears that some companies have granted such
“backdated” options. Their standard defense is that the
options weren’t backdated. In a March 18, 2006, Wall Street
Journal article, the reporters noted a situation where a
company (Affiliated Computer Services) had, for several
years, selected the option price based on the date when the
stock had traded at its low. The Journal concluded that the
odds of this happening by chance were extraordinarily
remote -- around one in 300 billion.
Obviously, when such practices are revealed, the individuals
who suffer are the shareholders in the corporation.
Among the companies allegedly involved in such practices are:
Power Integrations Inc. (NASDAQ: POWI) This San Jose-based
company was discussed last week. As a result of its practice,
the Chairman and CFO resigned.
Altera Corporation (NASDAQ: ALTR) another San Jose-based
company which engages in the design, manufacture, and
marketing of programmable logic devices (PLD); structured
application-specific integrated circuit devices; predefined
design building blocks or intellectual property cores; and
associated development tools.
Jabil Circuit, Inc. (NYSE: JBL) a Florida-based company which
provides electronic manufacturing services and solutions
worldwide.
Brooks Automation, Inc. (NASDAQ: BRKS) a
Massachusetts-based company which supplies automation
products and solutions to semiconductor market.
Affiliated Computer Services Inc. (NYSE: ACS) A
Dallas-based company which provides business process
and information technology outsourcing solutions to
commercial and government clients. It operates through
two segments, Commercial and Government.
All five of these companies are under scrutiny now because
of their stock option practices. It appears that each of these
companies may have backdated the date when certain options
were granted. We are currently investigating each of these
companies (as well as the cases below) and if you are an
affected investor you may wish to contact us at
info@securitiessleuth.com or 877.511.4717 to discuss your
options.
Five other recent cases of particular interest are:
Cognos (NASDAQ: COGN) On Monday May 15, after the close
of trading, the Company, which is Canada’s biggest software
Company, disclosed that it would not file its Annual Report on
Form 10-K for the fiscal year ended February 28, 2006 on
time because of an ongoing review by the Staff of the Division
of Corporate Finance of the SEC that may impact the manner
in which the company allocates revenue. On May 16, 2006,
Cognos shares declined $4.46 per share, or approximately
13%, on heavier than usual volume. Investors who
purchased Cognos stock between June 23, 2005 and
May 15, 2006, are affected.
Escala Group Inc. (Nasdaq: ESCL) On May 9, 2005, ESCL
stock declined approximately $17.50 per share or 55% on
the news that Spanish police raided the offices of Escala Group,
its majority owner, Afinsa, and another company in a probe
of alleged fraud involving collectible stamps. Spanish police
arrested eight people in connection with the alleged fraud.
Investors who purchased Escala stock between
September 5, 2003 and May 8, 2006, are affected.
GlobeTel Communications Corp. (AMEX: GTE) It is alleged
that the Company made false and misleading statements
regarding the Company's $600 million deal with
Moscow-based LLC Internafta to provide internet services
in Russia. In truth, it is alleged that the deal was a sham.
An April 11, 2006 article published by The Motley Fool
questioned the credibility of the entire deal. On
April 11, 2006, after the truth about the joint venture was
exposed, the stock dropped 15%, trading at only $1.78,
well below its Class Period high of $3.92. Investors who
purchased GTE between December 22, 2005 and
April 11, 2006, are affected.
Discovery Laboratories (NASDAQ: DSCO) The Company
had represented for some time that it would receive FDA
approval in April 2006. But on April 24, 2006, the Company's
stock dropped more than 50% after it revealed that the
regulatory process would be significantly delayed.
Investors who purchased DSCO between December 28, 2005
and April 25, 2006, are affected.
XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) On
February 16, 2006, the Company disclosed: (1) higher than
expected expenses and net loss due to greater than
expected spending on new subscription acquisitions and
(2) a director resigned due to his concerns about the cost
of growth in terms of losses. Prior to this disclosure, the
Company’s CEO dumped nearly all his XM shares for
proceeds of approximately $11.8 million. Investors who
purchased XM stock between July 28, 2005 and
February 15, 2006, are affected.
At this time, there are an unusually large number of corporate
irregularities. Other cases of corporate irregularities under
investigation include:
America Service Group Inc. (ASGRE)
Richardson Electronics (NASDAQ: RELL)
Fairfax Financial Holdings, Ltd. (FFH)
Zale Corporation (ZLC)
Tier Technologies, Inc. (TIERE)
CSK Auto Corporation (CAO)
Nature's Sunshine Product, Inc. (NATRE)
Global Power Equipment (GEG)
Allion Healthcare, Inc. (ALLI)
Terayon (TERNE)
Sea Containers, Ltd. (NYSE: SCR-A)
GMH Communities Trust (NYSE: GCT)
For details regarding any of these cases, go to
www.securitiessleuth.com.
Now with respect to settled cases. If you are an affected
investor – you purchased any of these stocks during the
relevant class period, you may wish to contact the claims
administrator to obtain additional information. Remember,
if you don’t submit your claim form, you won’t receive your
proportionate share of recovery.
Two cases that have recently settled that may be of particular
interest are:
ARM Financial Group, Inc. (ARMGQ)
Class Period: February 10, 1998 to August 3, 1999
Claims Deadline: October 4, 2006
Claims Administrator: Garden City
Safety-Kleen Corp. (SK) (bonds)
Class Period: April 17, 1998 to March 5, 2000
Claims Deadline: June 5, 2006
Claims Administrator: Garden City
Information regarding other recent settled cases, including the
cases listed below can be found at www.securitiessleuth.com.
Network Engines, Inc. (NENG)
Boston Chicken, Inc. (BOST)
Surebeam Corp. (SURE)
Salton, Inc. (SFP)
Bristol-Myers Squibb (BMY)
Royal Ahold N.V. (AHO)
Textron, Inc. (TXT)
Eaton Vance Corp. (EV)
eFunds Corporation (EFD)
Uniroyal Technology Corp.(UTCIQ)
Information regarding these settled cases can be found at www.securitiessleuth.com.
Again, you should contact the claims administrator (rather than us).
However, if you are an affected investor in any of the companies
under investigation, you many wish to contact us so that you
can consider your options.
Likewise, if you happen to be aware of corporate restatements
or other financial fraud -- especially if you're a victim --
you're encouraged to contribute to the Sleuth by giving your
own tip-offs at www.securitiessleuth.com or by e-mailing
info@securitiessleuth.com. You can also call Mark McNair
at 877-511-4717. If you have a friend or colleague you
think would benefit from The Sleuth, please pass along
this issue and ask them to sign up at
www.cartville.com/app/join.asp?MerchantID=47994.
Warmest regards,
Mark McNair
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