200 million in unrecorded option expenses over a 26-year period.....

Discussion in 'Wall St. News' started by S2007S, Dec 7, 2006.

  1. S2007S


    another day and another backdated stock option investigation.

    Home Depot (HD) routinely backdated stock options grants for executives and employees at all levels of the company for nearly 20 years, according to an internal investigation whose results the company announced Wednesday.
    It said in a statement the investigation by a board subcommittee and the Hogan & Hartson law firm found "there was no intentional wrongdoing by any current member of the company's management team or its board of directors."

    Because of the errors, which included regular backdating of grants from 1981 through November 2000, the company had unrecorded expenses of about $200 million, Home Depot said.

    For the fiscal year 2006, the giant home improvement retailer reported earnings of $5.8 billion on revenue of $81.5 billion.

    Home Depot disclosed in September that the Securities and Exchange Commission has begun an informal inquiry into the company's stock option practices and the U.S. Attorney's Office in New York has asked for information.

    For Home Depot's annual option grants and some quarterly grants from 1981 through November 2000, the "stated grant date was routinely earlier than the actual date on which the grants were approved by a committee of the board of directors," the company's statement said. "In almost every instance, the stock price on the apparent approval date was higher than the price on the stated grant date."

    The company blamed "management personnel, who have since left the company," for the practice. Selecting a date with a low stock price increased the options' value.

    Home Depot's findings could cause public relations problems for two members of its board:

    •CEO Robert Nardelli. Named CEO on Dec. 6, 2000, Nardelli had nothing to do with the backdating earlier, according to the report. But he has become a lightning rod for criticism of excessive CEO pay. He has collected some $200 million in salary, bonuses and options since joining the company, but Home Depot's shares have declined in value during that time.

    •Kenneth Langone. A co-founder and longtime member of Home Depot's board, he sat on board committees that oversaw option grants for many of the years when options were backdated.

    Langone is already embroiled in a separate executive compensation controversy. New York State Attorney General Eliot Spitzer has accused him and former New York Stock Exchange CEO Richard Grasso of hiding the true value of Grasso's pay package from the NYSE board.

    Grasso was ousted at the NYSE in 2003 after disclosing that he was due $189 million. Langone headed the NYSE compensation committee during part of the time that Grasso's compensation soared.

    Jim McCarthy, a spokesman for Langone, said there was absolutely no connection between the two matters