September 6, 2007

Tweaking Your Equity-Based Comp Tables From One Year to Next

I’ve started doing the prep calls with the panels for our “Tackling Your 2008 Compensation Disclosures: The 2nd Annual Proxy Disclosure Conference” – and it’s amazing how much there will be to cover, even though we all have a year under our belt under the SEC’s new rules. And that doesn’t even take into account the flurry of SEC comment letters that just came out.

For example, during the “Analyzing the Equity-Based Tables” panel (featuring the SEC’s Paula Dubberly, Howard Dicker, Alan Kailer and Martha Steinman), you will learn:

– How to properly classify an equity award from an accounting perspective (lots of companies made errors) – and what to do next year, if you got it wrong this year
– How many of your numbers will change columns from one year to next – and how to avoid pitfalls
– What are the latest trends in grant practices – and how that impacts your disclosure
– What are the SEC comments (and latest positions) on the equity-based tables, including the challenging comments regarding performance targets

You can catch this critical Conference either live in San Francisco or via video webcast. Remember how practical last year’s Conference was – this year will be no different: Register today!

In the SEC’s Enforcement Division’s Crosshairs: General Counsels

Following up on my blog that linked to an article that blamed lawyers for option backdating, Keith Bishop has compiled this lengthy list of SEC Enforcement actions against general counsels so far this year. As you can see, the actions aren’t limited to backdating:

– On January 10th, the SEC announced that it had settled civil fraud charges against the former general counsel of Comverse Technology, William Sorin, under an agreement which provides for the payment of over $3 million in civil penalties, disgorgement, and prejudgment interest, a permanent injunction, a permanent officer-and-director bar, and suspension from appearing or practicing before the SEC as an attorney.

– On February 28th, the SEC filed a complaint charging Kent Roberts, the former general counsel and corporate secretary of McAfee, with securities fraud for wrongfully re-pricing McAfee stock option grants awarded to him and others in an effort to secretly increase the value of the grants.

– On March 1st, the SEC filed a complaint against Randi Collotta, a compliance officer and lawyer, alleging that she provided material, nonpublic information concerning upcoming corporate acquisitions involving Morgan Stanley’s investment banking clients to a registered representative at a Florida broker-dealer.

– On March 28th, the SEC charged two former in-house attorneys of Enron Corp., Jordan Mintz, a former Enron Vice President and General Counsel of Enron’s Global Finance group and Rex Rogers, a former Enron Vice President and Associate General Counsel, in connection with a fraudulent scheme to make material misrepresentations in, and to omit material disclosures from, Enron’s public filings.

– On April 2nd, the SEC filed suit against Christi Sulzbach, the former general counsel at Tenet Healthcare. The suit charges that Tenet, through the general counsel and other executives, misled the investing public by failing to disclose Tenet’s strategy, its impact on revenues and earnings, and its unsustainability in the portion of its public filings with the Commission known as MD&A.

– On April 5th, the SEC issued an Order Instituting Administrative Proceedings pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions against Myron Olesnyckyj. Olesnyckyj served as General Counsel of Monster Worldwide.

– On April 18th, the SEC filed a civil injunctive action against Kevin Heron, the former general counsel, corporate secretary, and chief insider trading compliance officer of Amkor Technology. The complaint alleges that alleges that over a two-year period, Heron illegally traded in Amkor securities prior to five Amkor public announcements relating to financial results and company business transactions.

– On April 24th, the SEC filed a civil suit against Nancy Heinen, the former general counsel at Apple, saying her actions led to “fraudulent” stock option backdating at the company.

– On May 31st, the SEC filed civil fraud charges against California-based software maker Mercury Interactive and four former senior officers of Mercury, including its former General Counsel, Susan Skaer. The SEC alleges that the former senior officers perpetrated a fraudulent and deceptive scheme from 1997 to 2005 to award themselves and other employees undisclosed, secret compensation by backdating stock option grants, failing to record hundreds of millions of dollars of compensation expense, and falsifying documents to further this scheme.

– On June 6th, the SEC instituted Rule 102(e) administrative proceedings against Chris Gunderson, the General Counsel of Universal Express. The SEC’s proceedings are based upon an injunction issued in February 2007 by the U.S. District Court for the Southern District of New York.

– On August 3rd, the SEC announced that a federal jury found Michael Pietrzak and Maurice Furlong liable for securities fraud and other charges in their operation of Hexagon Consolidated Companies of America, a development stage mining company headquartered in Reno. Pietrzak was HCCA’s general counsel, CFO, and executive secretary, as well as a director. (The SEC filed this case in 2003).

– On August 28th, the SEC charged Lisa Berry with routinely backdating option grants from 1997 to 2003, first as General Counsel of KLA-Tencor Corporation and then as General Counsel of Juniper Networks. The Commission alleges that Berry’s misconduct caused the two companies to conceal hundreds of millions of dollars in stock option compensation expenses relating to undisclosed in-the-money options provided to company executives and employees.

The D&O Insurance Market Is Soft

This month’s Directors & Boards’ e-briefing includes a piece by Holland & Knight about “The D&O Insurance Market Is Soft.” Funny how everything has its cycles – not too long ago, the D&O insurance market was rock hard…

– Broc Romanek