U.S. Expands Inquiry Into Stock Options
Government probes into executive stock-option grants widened Monday, as Juniper Networks Inc., F5 Networks Inc., Brooks Automation Inc. and Openwave Systems Inc. said they had been contacted by prosecutors or regulators.
Juniper, the second-biggest maker of equipment to direct Internet traffic, said the U.S. attorney in Brooklyn, N.Y., requested information on the company’s option grants. F5 Networks, another Internet-traffic equipment company, and Brooks Automation, a maker of software and machines used in chip production, also received subpoenas from the prosecutor.
Openwave, a supplier of mobile-phone software, said it received a letter of inquiry from the Securities and Exchange Commission. The SEC requested information on F5’s stock option grants Thursday. Brooks Automation received a similar SEC request May 12.
They bring to at least 15 the number of companies under investigation by the Justice Department, the SEC or both. The regulators are trying to determine whether the companies deliberately moved back their option grants to dates when the stock price was lower, helping to ensure that the options would make money for the executives who received them.
“The stock-option game is supposed to confer the potential for profit, but also some risk,” said John Freeman, a professor of business ethics at the University of South Carolina Law School who was a special counsel to the SEC during the 1970s. “When in essence the executives are betting on yesterday’s horse races, knowing the outcome, there’s no risk whatever.”
Shares of Redwood City, Calif.-based Openwave fell 69 cents to $14.68. F5 Networks shares rose $1.74, to $52.35, and Brooks Automation shed 21 cents, to $12.31.
Sunnyvale, Calif.-based Juniper rose 43 cents to $15.49. The stock fell 11% in four days last week after a report by the Center for Financial Research and Analysis said it was among 17 companies “at risk” of scrutiny for its stock-option practices.
CNet Networks Inc., another company named in the financial research center’s report, said its board formed a committee to investigate past option grants. CNet shares fell 68 cents to $9.16.
Juniper said in a statement that it was cooperating with the investigation by the U.S. attorney for the Eastern District of New York. The company’s audit committee is reviewing its option-granting practices. Openwave said it was cooperating with the SEC. F5 and Brooks also said they were cooperating in the probes.
Bob Nardoza, a spokesman for the U.S. attorney in Brooklyn, declined to comment. SEC spokesman John Nester declined to comment as well.
The Wall Street Journal reported Monday that five other companies made grants that were dated when the share prices were low, including KLA-Tencor Corp. of San Jose, the leading maker of machines that test semiconductors during production.
Shares of KLA-Tencor fell $4.70 to $40.54. Executives did not return calls for comment.
Last week the probes broadened to companies including insurer UnitedHealth Group Inc. and student loan processor Affiliated Computer Services Inc.
