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Two weeks ago there was a guest editorial in the
Wall Street Journal regarding the backdating of options.
The corporate apologist who wrote the article declared
that the backdating of options wasn’t the “crime of the
century.” As we all know, with all the ghastly crimes and
terrorism we read about daily, the backdating of options
isn’t by any means the crime of the century.
Still that doesn’t mean that the practice is right or it isn’t
a problem for shareholders. Basically, shareholders deserve
more from companies that they choose to invest in. And
shareholders expect more from outside directors who
should be looking after their interest.
Although more than 50 companies have been embroiled
in the backdating of options scandal, the situation at three
companies below is illustrative of the problem.
First, it’s not just a US problem. On July 3, 2006,
M-Systems Flash Disk Pioneers Ltd (NASDAQ: FLSH) , an
Israel-based maker of flash memory disks, disclosed:
(1) that it will restate its financial reports for 2001 to 2005
and revise its financial information for the first quarter because
the Company’s internal review found the actual measurement
dates of some past stock option grants differ from their previously
recorded measurement dates; and (2) the Securities and Exchange
Commission has begun an informal investigation into the
company's stock-option grants.
Second, consider KLA-Tencor Corporation (NASDAQ: KLAC).
It has been alleged that KLA-Tencor and its top executive officers
and directors violated the federal securities laws by failing to
account properly for stock options made to KLA-Tencor employees.
It is further alleged that by improperly expensed stock options,
the Company falsely inflated its reported financial performance.
Investors who purchased KLA-Tencor Corporation stock between
February 13, 2003 and May 22, 2006, are affected.
Finally, another company whose investors have backdated stock
options woes is Altera Corp (ALTR). On June 21, 2006, Altera
revealed that it expects to restate financial reports for the past
decade to show higher costs because of stock option grants it did
not properly account for. Investors who purchased between
August 10, 2001 and June 21, 2006 are affected.
Unfortunately, as you are well aware, the backdated stock options
scandal isn’t limited to M-Systems Flash Disk Pioneers, KLA-Tencor
and Altera. Others companies where investors have been
negatively affected include Affiliated Computer Services Inc.
(NYSE: ACS), Power Integrations Inc. (NASDAQ: POWI),
American Tower Corp. (NYSE: AMT), Caremark Rx Inc.
(NYSE: CMX), CNET Networks (NASDAQ: CNET), F5 Networks Inc.
(NASDAQ: FFIV), Marvell Technology Group Ltd. (NYSE: MFE)
and SafeNet Inc. (NASDAQ: SFNT).
However, by no means have recent corporate irregularities
been limited to situations involving the backdating of stock options
for the benefit of corporate executives. Three other situations of
particular interest are highlighted below.
Herley Industries (NASDAQ: HRLY) On June 6, 2006, the
Company disclosed that the U.S. Attorney’s office in the
E.D. of Pennsylvania indicted the Company and its chairman
on charges of fraud. Investors who purchased between
October 1, 2001 and June 14, 2006, are affected.
Xerium Technologies, Inc. (NYSE: XRM) It has been alleged
that the Prospectus and Registration Statement issued in
connection with the Company's IPO contained untrue statements
of material facts and omitted to state other facts necessary to make
the statements made not misleading. Specifically, among other
things, the Prospectus purported to warn about the potential negative
impact of its “Cost Reduction Programs” but failed to disclose that
the Company's business was then being negatively impacted by
the Cost Reduction Programs and the loss of business associated
therewith. Investors who purchased Xerium pursuant and/or
traceable to the Company's IPO on or about May 16, 2005
through November 15, 2005, are affected,
CSK Auto Corporation (NYSE: CAO) On March 26, 2006, the
Company indicated that it need to conduct a thorough review
of certain accounting errors and irregularities discovered in the
course of its ongoing assessment of internal control over financial
reporting and an internal audit. Investors who purchased CAO
between September 2, 2004 and March 24, 2006, are affected.
If you are an affected investor in any of these companies,
you may wish to contact us at info@securitiessleuth.com or
877.511.4717 to discuss your options.
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
share of any settlement.
Whitehall Jewellers (JWL)
Class Period: November 19, 2001 to December 10, 2003
Claims Deadline: August 14, 2006
Claims Administrator: Gilardi
Information regarding other recent settled cases, including the
cases listed below can be found at www.securitiessleuth.com.
ARM Financial Group, Inc. (ARMGQ)
Network Engines, Inc. (NENG)
Boston Chicken, Inc. (BOST)
Surebeam Corp. (SURE)
Salton, Inc. (SFP)
Bristol-Myers Squibb (BMY)
Royal Ahold N.V. (AHO)
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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