ScanSource Embroiled In Options Backdating Controversy
ScanSource plans to review its stock-options grant practices in response to a newspaper article questioning whether the Greenville, S.C.-based distributor backdated grants to several executives.
ScanSource has selected a special committee of independent board members, assisted by independent legal counsel and advisers, to review its options grants dating back to its initial public offering in 1994. ScanSource issued a statement about the review, but executives declined to comment.
"The company expects to be in a position to comment further on these matters after the review by the special committee is complete," the statement said.
Earlier this week, the Charlotte Observer reported that ScanSource may have backdated grants for several executives.
Options backdating, which involves selecting a previous date for grants when the stock price is lower, allows executives to make more money selling the granted shares.
The Charlotte Observer reported that ScanSource granted options on 18 dates since 1995, and seven times the stock was at its lowest point for at least a month on either side. In two more cases, the price was at the second-lowest point during that two-month period. In all but two instances, the stock dropped before the grant and then increased, according to the newspaper's report.
For example, four ScanSource executives -- CEO Michael Baur, former chairman Steven Owings, former CFO Jeffery Bryson and Vice President Of Marketing Bobby McLain -- reported total grants of 62,500 options on Jan. 10, 2000, when the stock closed at $40 per share. However, the filings said the grants were made on Dec. 6, 1999, when the stock closed at $33.62, according to the paper. The difference netted the executives $398,750.
More than 100 companies -- including IT firms such as Apple Computer, Brocade Communications, Comverse Technologies and McAfee -- have become the subject of stock options investigations. On Wednesday, McAfee said Chairman and CEO George Samenuk and President Kevin Weiss are leaving the company after it found accounting glitches in its stock-options grants.