News & Events

Lie: Expect More Lawsuits in Backdating Scandal

An accounting controversy is depressing the stock prices of dozens of tech companies, turning some into takeover targets. Last week, flash memory maker SanDisk said it would acquire Israeli rival Msystems for $1.55 billion. The Securities and Exchange Commission is examining whether Msystems and about 80 other companies improperly accounted for stock-option grants. Options allow employees to buy shares of a company at a fixed price in the future. They're a popular way for fast-growing tech firms to woo workers. But some companies have been accused of improperly tweaking the timing of options grants to increase their value, especially during the dot-com boom and bust. That's a huge liability. Two former executives of communications software maker Comverse Technology surrendered to the FBI Wednesday after being charged with options fraud, while a third went missing. (Story, 1B.) Two executives of storage-maker Brocade Communications Systems face similar charges and are out on bail. Shareholder lawsuits are already being filed against Comverse, Brocade, Apple and other companies. Expect more as the controversy unfolds, says ERIK LIE, a business professor at the University of Iowa.


Return to top of page