Posthumous Award for Director: Options

In one of the more unusual twists in the current wave of stock option irregularities, cable TV operator Cablevision Systems Corp. said it granted options to a board member after he died.

Cablevision restated its financial results Thursday because of improper stock option practices and also said it had received a subpoena from the U.S. attorney’s office in New York, which is investigating the Bethpage, N.Y.-based company.

In a regulatory filing, Cablevision disclosed that it had granted options to an executive after his death but improperly recorded the date of the grant as an earlier date when the executive was still alive.

Cablevision didn’t identify the executive, but the Wall Street Journal, citing people familiar with the situation, said the options were given to Vice Chairman Marc Lustgarten, who died in 1999. The newspaper said Lustgarten’s estate was entitled to exercise the options upon his death. A Cablevision spokesman didn’t return a call Friday for comment.

Paul Hodgson, a senior research associate with Corporate Library, a corporate governance research firm, said that although the grant of options to the dead man was “a fairly small offense,” it “may be demonstrative of a wider lack of ethics.”

Cablevision also restated financial results Thursday because of the option practices, with a net effect of reducing earnings by $89 million since 1997.

Options give the recipient the right to buy shares at a specific price and thus a chance to profit if the shares rise above that price before the options expire.

Merrill Lynch analyst Jessica Reif Cohen said that although the investigation by the U.S. attorney’s office could take “unexpected turns, we have no current basis to believe that it will result in a material change to the company’s financial results or impact the earnings going forward.”