News & Analysis
Brooks subpoenaed over options granting practices
5/22/2006 6:43 PM EDT
Brooks said it received the subpoena on May 19 and that it intends to fully cooperate with the U.S. Attorney in responding to it.
Brooks (Chelmsford, Mass.) is one of several companies now facing questions about historical stock options granting practices. The controversy has centered on the practice of backdating stock options — retroactively dating stock option grants to market value on a date when a company's stock value was relatively low, thus increasing the option holder's potential for profit.
The chief financial officer of KLA-Tencor Corp., the No. 2 supplier of semiconductor capital equipment, reportedly said Monday that U.S. federal prosecutors are investigating the timing of historical stock option grants at that company. KLA-Tencor and Trident Microsystems Inc. were among five companies whose historical stock options granting practices were question in a Monday article in The Wall Street Journal.
Vitesse Semiconductor Corp. said last week that it is being investigated separately by both the U.S. Securities and Exchange Commission (SEC) and the U.S. Attorney’s office in New York. One day earlier, Vitesse said it had terminated three executives, including its CEO, that had been suspended in April as a result of the stock options granting investigation.
Altera Corp. and Power Integrations Inc. have also said they were internally investigating historical stock options granting procedures. Directors from both Brooks and Power Integrations have resigned in connection with these investigations within the past few weeks. Altera, Brooks and Vitesse have all reported being notified by the Nasdaq marketplace of possible delisting for failing to file their most recent quarterly reports in a timely manner. Each company has said it would hold off submitting these reports to the SEC pending completion of internal investigations.
Brooks has said it will restate its quarterly financial earnings for 28 consecutive quarters from fiscal 1999 through fiscal 2005. Vitesse and Power Integrations have also admitted that they will need to restate at least some historical quarterly earnings.
Brooks' stock closed at $12.31 in Nasdaq trading Monday, down nearly 10 percent from $13.61 on April 26, the day the company announced it had formed a special committee of independent directors to conduct an internal review of matters related to past stock option grants, including timing. Brooks continued to trade lower in after hours trading following the subpoena announcement Monday, slipping below $12.05 by 6 p.m. Eastern.
