|
Just like a balloon that keeps expanding, every week the
number of companies with backdated options problems
continues to grow. Last week was no exception.
Currently, well over fifty companies have been affected
by the scandal. Whereas in some instances the stock
price has not dropped significantly with such revelations,
in others instances the stock price of the affected
company has dropped sharply. More troubling in a
few cases, affected companies have announced that they
will have to restate their earnings. Once internal and
external inquiries are completed, it is likely that additional
companies will need to restate their earnings.
This week, the backdated options problems at two
companies will be briefly highlighted.
First, on July 5, 2006, before the opening of trading,
database management software maker Quest Software Inc.
(NASDAQ: QSFT) disclosed that it will restate its annual
and interim financial statements for 2000 through 2005 and
for the quarter ending March 31 as the result of initial
findings of a special committee review of stock option
grants. Its stock dropped approximately 10% on this news.
Specifically, the Company disclosed that its preliminary
finding is that the administrative approvals required to
establish the accounting measurement dates for many of
the company's stock option grants awarded during the fall
of 1999 and into 2002 were actually obtained after the
measurement dates used for financial reporting purposes.
The Company decided that non-cash stock-based
compensation expense should have been recorded with
respect to those stock option grants and recognized over
the vesting period of the options, and that the additional
expense "will be significant." The Company also disclosed
that the SEC had opened an informal inquiry.
Second, on June 27, 2006, California based Computer
chip supplier Rambus Inc. (NASDAQ: RMBS) indicated
that it might have to restate its financials because the
timing of stock options granted to its employees wasn't
properly recorded. Previously, the Company announced
that it had been conducting an internal review of its stock
options awards.
Another company whose shareholders are having increasing
difficulties is Sunterra Corporation (Nasdaq: SNRR).
On July 5, 2006, the Company announced that it had
received a letter from NASDAQ informing the Company
that the Nasdaq Listing Qualifications Panel had determined
to deny the Company's request for continued inclusion on
The NASDAQ National Market and, therefore, to delist the
Company's common stock effective with the open of business
on Friday, July 7, 2006. This action follows the Company's
request to the Panel for a listing exception after the Company
did not file its Quarterly Report for the quarter ended
March 31, 2006 with the SEC in a timely fashion, which
resulted in the Company's non-compliance with NASDAQ's
timely filing requirement.
The difficulties at Sunterra began some time ago when it
was disclosed that a terminated employee notified the
Company in December that accounting irregularities were
occurring in Europe. Subsequently, the Company launched
an internal probe and as a result, the Company decided to
place its president and CEO on paid administrative leave.
As previously noted, well over 50 companies have been
affected by the backdated options scandal. Two companies
that were discussed in last week’s issue were Israel-based
M-Systems Flash Disk Pioneers Ltd (NASDAQ: FLSH) and
Altera Corp (ALTR).
Other companies whose investors have been significantly
affected by the scandal are 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 needs 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.
Imperial Chemical Industries PLC (ICI)
Class Period: August 1, 2002 to March 24, 2003
Claims Deadline: October 18, 2006
Claims Administrator: Rust Consulting
Information regarding other recent settled cases, including the
cases listed below can be found at www.securitiessleuth.com.
Whitehall Jewellers (JWL)
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
|
