The Backdating Scene
Wanna know how many Texas lawyers are making their long green these days? Today's issue of Texas Lawyer has the answer: defending companies being investigated by the Securities and Exchange Commission and the Department of Justice, who're busy looking into allegations of stock option backdating. And not only that, but shareholders are going after companies too when they hear of backdating going on; nothing's better for business than a good ol' fashioned class-action suit. Not that backdating is illegal; in fact, it's a rather common practice for companies to offer stock options at earlier, lower-than-current-market-value prices in order to slide a little extra dough an exec's way. But it becomes a problem when companies don't inform their shareholders about the practice, as Irving-based Michael's Stores Inc. and Dallas-based Affiliated Computer Services have been finding out.
As we mentioned a few weeks ago, ACS has the SEC and DOJ breathing down its neck, and Texas Lawyer reports that in addition to the three shareholder suits filed in state district court here, which ACS mentioned in a press release in May, there was a federal shareholder suit filed in June in the U.S. District Court for the Northern District of Texas. According to the story, that suit, Alaska Electrical Fund v. Jeffrey Rich, et al., "alleges, among other causes of action, breach of fiduciary duty, abuse of control and gross mismanagement in connection with stock option awards that allegedly were backdated." Allegedly. And Michael's has its own set of issues: The U.S. District Court for the Southern District of New York has some questions, as do shareholders in both Dallas state court and federal court. --Robert Wilonsky
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