Endocare Options in Probe

Endocare Inc. disclosed Tuesday that it was being investigated over stock-option grants less than a month after settling fraud cases with U.S. regulators.

The Irvine-based medical device company said the investigation followed an internal review that turned up questionable grants. The grants involved former officers and directors, Endocare said in a statement.

The Securities and Exchange Commission and Justice Department are still examining the conduct of former employees and officers after settling an accounting case last month, the company said. With options now a part of the probe, Endocare becomes one of more than 80 companies being scrutinized over such grants.

No current Endocare executives or directors are involved in the investigation of option grants, company spokesman Matt Clawson said. The statement said the company would cooperate with investigators.

An internal audit found options from 1997 to 2002 in which the dates used to set the value differed from the award date. The current chief executive, Craig T. Davenport, was hired in December 2003. The irregularities weren’t enough to require a restatement of financial reports.

Endocare’s settlement last month concerned an investigation begun in January 2003. Endocare paid $750,000 to the SEC. The disclosure of the options investigation accompanied a report on second-quarter earnings.

The company said its loss narrowed to $708,000, or 2 cents a share, from a loss of $4.2 million, or 15 cents a share, a year earlier. Sales were unchanged at $6.9 million.

Endocare’s shares fell 17 cents to $2.20.