US IT companies face stock option fraud probe

Federal prosecutors in the San Francisco area are stepping up their investigation into IT companies for possible illegal stock option fraud, as the widely used US practice of backdated stock options comes under increasing scrutiny.

Federal prosecutors in the San Francisco area are stepping up their investigation into IT companies for possible illegal stock option fraud, as the widely used US practice of backdated stock options comes under increasing scrutiny.

Apple Computer and CA are already conducting their own investigations into backdated stock options.

The US Attorney’s Office has confirmed that a number of companies are now being investigated, with charges possibly being brought as a result.

US Attorney Kevin Ryan said a task force is trying to determine whether Northern Californian companies retroactively changed the grant date of stock options, with intent to defraud investors.

A number of Bay Area companies have publicly admitted they are under investigation.

These include Altera, Applied Micro Circuits, Asyst Technologies, Equinix, Foundry Networks, Intuit, Linear Technology, Marvell Technology Group, Maxim Integrated Products, Openwave Systems, Power Integrations, Redback Networks, VeriSign, and Zoran.

If executives are able to change stock option grant dates retrospectively, to when the stock was trading at a lower price, the options become more lucrative.

Companies are also being investigated over whether they engaged in "spring-loading," whereby stock options are awarded before a positive company announcement, driving up the share price.

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