Once again, it is time to update the numbers.

Of the 38 options backdating cases that have been filed as securities class actions, 23 have now reached a resolution. Of the resolved cases, 10 of those cases have been dismissed and 13 have settled.

The thirteen settlements total $1.32 billion, for an average of $101 million.

However, removing the newest (and largest) kid on the options backdating settlement block (UnitedHealth Group) lowers the average back to $35.48 million.

As kindly pointed out by representatives from Coughlin Stoia, lead counsel in the UnitedHealth case, that settlement is:

- more than double the previous total recoveries

- more than 20 times the average recovery in other settled cases

- more than 5 times the previous largest settlement

As we noted earlier, the options backdating cases have settled much more quickly on average, than other cases. The thirteen cases have settled in an average of 567 days. Removing the two outliers, Mercury Interactive, and Brocade, which were filed earlier and added the options backdating allegations in a later amended complaint, drops the average time from filing of initial complaint to tentative settlement for the remaining 11 cases to 498 days.

And the ratio of settlements to dismissals is somewhat out of line with historical averages as well. Most studies (and a quick check of our database) indicate that the percentage of new securities class actions that are dismissed is between 33-40 percent.

With this group of cases, we can look at the data two ways. Dismissals as a percentage of total cases or dismissals as a percentage of cases that have reached a final, or quasi-final resolution.

Under the former analysis, just over 26% of these cases have been dismissed. That number is artificially low, as not all of the cases have yet had a ruling on the motion to dismiss.

Under the latter method, 47.6% of these cases have been dismissed. This number is artificially high, as a number of these cases have already survived a motion to dismiss.

Our complete analysis can be accessed in this presentation.

Friday, June 20, 2008

Options Backdating - Updating the Scorecard

Back in May, we took a fresh look at the scorecard in the options backdating litigation, tallying up the settlements and dismissals, among other things.

It is time to update the analysis for a few reasons. One, there have been some new settlements, notably Brocade Communications which at $160 million, topped the largest prior options backdating related class action settlement, Mercury Interactive. Second, our research (and some gentle prompting from The D&O Diary) has led us to revise our count of cases.

Of the 38 options backdating cases that have been filed as securities class actions, 10 of those cases have now been dismissed and 11 have now settled.

The eleven settlements total $418 million, for an average of $38 million.

As noted earlier, these cases have settled much more quickly on average, than other cases. The eleven cases have settled in an average of 531 days. Removing the two outliers, Mercury Interactive, and Brocade, which were filed earlier and added the options backdating allegations in a later amended complaint, drops the average time from filing of initial complaint to tentative settlement for the remaining 9 cases to 439 days.

And the ratio of settlements to dismissals is somewhat out of line with historical averages as well. Most studies (and a quick check of our database) indicate that the percentage of new securities class actions that are dismissed is between 33-40 percent.

With this group of cases, we can look at the data two ways. Dismissals as a percentage of total cases or dismissals as a percentage of cases that have reached a final, or quasi-final resolution.

Under the former analysis, just over 26% of these cases have been dismissed. That number is artificially low, as not all of the cases have yet had a ruling on the motion to dismiss.

Under the latter method, 47.6% of these cases have been dismissed. This number is artificially high, as a number of these cases have already survived a motion to dismiss.

Our complete analysis can be accessed in this presentation.

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Thursday, May 15, 2008

What A Difference A Few Months Makes

Back in February, we took a quick look at the scorecard in the options backdating litigation, tallying up the settlements and dismissals, among other things.

In our earlier review, of the 36 options backdating cases that have been filed as securities class actions, 7 had settled and 3 had been dismissed.

Run the clock for a few months, and 9 of those cases have now been dismissed and 9 have now settled.

The nine settlements total $255.58 million, for an average of $28.4 million.

As noted earlier, these cases have settled much more quickly on average, than other cases. The nine cases have settled in an average of just 440 days. Removing the outlier, Mercury Interactive, which was filed earlier and added the options backdating allegations in a later amended complaint, drops the average time from filing of initial complaint to tentative settlement for the remaining 8 cases to 397 days.

And the ratio of settlements to dismissals is somewhat out of line with historical averages as well. Most studies (and a quick check of our database) indicate that the percentage of new securities class actions that are dismissed is between 33-40 percent.

With this group of cases, we can look at the data two ways. Dismissals as a percentage of total cases or dismissals as a percentage of cases that have reached a final, or quasi-final resolution.

Under the former analysis, exactly 25% of these cases have been dismissed. That number is artificially low, as not all of the cases have yet had a ruling on the motion to dismiss.

Under the latter method, 50% of these cases have been dismissed. This number is artificially high, as a number of these cases have already survived a motion to dismiss.

In any event, things remain interesting in the sometimes long-forgotten world of options backdating.

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Sunday, February 10, 2008

Options Backdating - Keeping Score

With the recent settlement of the securities class action litigation involving alleged options backdating at HCC Insurance Holdings, we decided to take a quick look back at our list to see what was happening with these cases.

Of the 36 cases, 3 have been dismissed and 7 have settled.

The seven settlements total $244.55 million, for an average of just under $35 million. Removing the Mercury Interactive Corp. settlement, which represents nearly half of the total settlements, drops the average to a still respectable $21.18 million.

Of particular interest, these cases have settled much more quickly on average, than other cases. The seven cases have settled in an average of just 509 days. Again removing the outlier, Mercury Interactive, which was filed earlier and added the options backdating allegations in a later amended complaint, drops the average time from filing of initial complaint to tentative settlement for the remaining 6 cases to 463 days.

And the ratio of settlements to dismissals is somewhat out of line with historical averages as well. Most studies (and a quick check of our database) indicate that the percentage of new securities class actions that are dismissed is between 33-40 percent.

In these cases, we can look at the data two ways. Dismissals as a percentage of total cases or dismissals as a percentage of cases that have reached a final, or quasi-final resolution.

Under the former analysis, just over 8% of these cases have been dismissed. That number is artificially low, as not all of the cases have yet had a ruling on the motion to dismiss.

Under the latter method, 30% of these cases have been dismissed. This number is artificially high, as a number of these cases have already survived a motion to dismiss.

For a running update on the derivative options backdating cases, refer to Kevin LaCroix's master list here, and his list of dismissal and settlements, here.

UPDATE: The D&O Diary has an in depth post on the options backdating litigation, here.

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Friday, June 8, 2007

Know when to fold em?

Chief Judge James M. Rosenbaum has issued a very short opinion in the UnitedHealth Group options backdating litigation, denying in full the defendants' motion to dismiss the complaint.

The five page opinion describes the alleged options backdating scheme at UnitedHealth as reminiscent of the 1973 film classic, The Sting. Movie buffs will remember that in The Sting, Paul Newman and Robert Redford employed a scheme involving “past-posting,” or betting on horse races after the results are already known.

Indeed, though my tea leaf reading skills still have not been verified, the following passage should give pause to the defense attorneys in the case:

Plaintiffs’ claims are nowhere near as complex as defense counsel suggest. If plaintiffs are correct, this case is incredibly simple. Plaintiffs claim defendants were playing a game with a stacked deck. When awarded options, with deliberately selected grant dates which were already in the money, defendants were playing a game they knew they could not lose; and, unsurprisingly, defendants won.

The lead plaintiff in the UnitedHealth litigation is CalPERS and lead counsel is Lerach Coughlin Stoia, Geller Rudman & Robbins.

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Monday, March 19, 2007

Options Backdating Class Actions - A New Twist

Our options backdating securities class action list has been updated to add Wireless Facilities, Inc. (NASDAQ: WFII) to the list. The number of companies on the list now stands at 29.

We are thrilled to report that our statement last week (that every single company on the options backdating securities class action list had also been named in an options backdating derivative lawsuit) has been trumped by the filing of the Wireless Facilities class action, as the company does not yet appear to be involved in derivative litigation.

The number of derivative actions filed, according to The D&O Diary's count is 153.

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Thursday, March 15, 2007

Options Backdating Class Actions - Comparing the Lists

Our options backdating securities class action list has been updated to add Monster Worldwide, Inc. (NASDAQ: MNST) to the list. The number of companies on the list now stands at 28.

The number of derivative actions filed, according to The D&O Diary's count is 152.

On an interesting side note - every single company on the options backdating securities class action list has also been named in an options backdating derivative lawsuit.

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Thursday, February 22, 2007

Options Backdating List Update

Our options backdating securities class action list has been updated to add Openwave Systems Inc. (NASDAQ: OPWV). The number of companies on the list now stands at 26.

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Tuesday, February 20, 2007

Options Backdating Securities Class Actions: The List - Update

Time to catch up on some housekeeping matters that resulted from the recent dormancy of Securities Litigation Watch.

The first order of business - our options backdating securities class action list has been updated to add Amkor Technology (NASDAQ: AMKR), Apollo Group (NASDAQ: APOL), Hansen Natural Corporation (NASDAQ: HANS), Quest Software (NASDAQ: QSFT) and Sunrise Senior Living (NYSE: SRZ). The number of companies on the list now stands at 25.

We will continue to update and maintain this list to track all newly filed securities class actions that have options backdating related allegations. The list will also include any previously filed cases that have recently added options backdating allegations.

Another excellent resource is The D&O Diary's list of options backdating related derivative lawsuits, here.

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Thursday, October 19, 2006

Options Backdating Securities Class Actions: The List--Update

Our options backdating securities class action list has been updated to add Michaels Stores, Inc.  The number of companies on the list now stands at 20.

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Tuesday, October 10, 2006

Options Backdating Securities Class Actions: The List--Update

Our options backdating securities class action list has been updated to add Marvell Technology Group, Ltd. and Meade Instruments, Inc..  The number of companies on the list now stands at 19.

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Friday, September 22, 2006

Options Backdating List Update and "Sixth Sense" Grants

Our options backdating securities class action list has been updated to add Jabil Circuit, Inc.  The number of companies on the list now stands at 17.

While we are on the subject, check out this post by Pat McGurn on SLW's sister (father? big brother?) blog, the ISS Corporate Governance Blog.  Commenting on reports of a bizarre grant of backdated options by Cablevision Systems to a deceased person, Pat says of these Sixth Sense grants ("I pay dead people") that:

In coming days, you should expect to see banner headlines screaming: "Pay For No Pulse" and "Can't Fog a Mirror Grant." Leading the parade, Columbia Law Professor John Coffee dryly quipped to the WSJ this am that "trying to incentivize a corpse suggests (the board) was not complying with the spirit of shareholder-approved stock-option plans." I checked the plan text and I can say that Jack is right, shareholders didn't authorize Sixth Sense grants.

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Monday, September 11, 2006

Options Backdating Securities Class Actions: The List--Update

Our options backdating securities class action list has been updated to add Aspen Technology.  The number of companies on the list now stands at 16.

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Wednesday, August 16, 2006

Options Backdating Securities Class Actions: The List--Update

Our options backdating securities class action list has been updated to add Zoran Corp. and Apple Computer.  The number of companies on the list now stands at 15.

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Monday, August 14, 2006

Options Backdating Securities Class Actions: The List--Update

Our options backdating securities class action list has been updated to add Broadcom Corp.  The number of companies on the list now stands at 12.

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Wednesday, August 9, 2006

Comverse Execs Face Criminal Charges

The Criminal Complaint filed today by federal prosecutors against three former executives of Comverse Technology (the former CEO, CFO and General Counsel) for options backdating is available here, courtesy of the WSJ Law Blog. 

Before your eyes glaze over and you hit the "Back" key to go read about something less arcane than strike dates, compensation accounting rules, etc., just know that the stuff in the Criminal Complaint is pretty fascinating.  The FBI agent providing the statement in the Criminal Complaint gets deep into the details of the alleged scheme at Comverse, including the creation of a secret slush fund account called Phantom in which options to fictitious employees were stashed and later awarded to favored employees for recruitment and retention.

The Criminal Complaint also details the alleged cover-up of the scheme when the WSJ started asking questions about options grants in March 2006, which according to the complaint included evidence tampering and numerous misstatements and half-truths to company lawyers, the company's auditors, the WSJ, and the Special Committee hired to investigate the matter. 

One of the more interesting statements in the Criminal Complaint is that according to the defendants, the backdating practice was shut down in April 2002 because of "the advent of Sarbanes-Oxley and a more stringent enforcement 'environment.'"

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Wednesday, August 2, 2006

Options Backdating Securities Class Actions: The List--Update

Our options backdating securities class action list has been updated to add Safenet, Inc. and remove Analog Devices.   Despite this article that suggested the Analog Devices case was a securities class action, SCAS has no confirmation of that to date. 

With one case added and one removed, the number of companies on the list remains at 11.

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Tuesday, July 25, 2006

Options Backdating Securities Class Actions: The List

As promised, below is a running list of all options backdating securities class actions known to RiskMetrics Group's Securities Class Action Services. We will update this list regularly.

Current number of cases: 38 (last updated June 20, 2008)

Case Name	Filing Date	Court
American Tower Corp.	05/26/2006	USDC - D. Mass.
Amkor Technology	11/21/2006	USDC - E.D. Pa.
Apollo Group	11/02/2006	USDC - D. Ariz.
Apple Computer, Inc.	08/25/2006	USDC - N.D. Ca.
Aspen Technology	09/08/2006	USDC - D. Mass.
Broadcom Corp.	08/13/2006	USDC - C.D. Cal.
Brocade Communications Systems, Inc.	05/19/2005	USDC - N.D. Cal.
Brooks Automation, Inc.	06/19/2006	USDC - D. Mass.
Comverse Technology, Inc.	04/19/2006	USDC - E.D.N.Y.
Cyberonics, Inc.	06/17/2005	USDC - S.D. Tex.
Hansen Natural Corporation	11/29/2006	USDC - C.D. Cal.
HCC Insurance Holdings, Inc.	03/08/2007	USDC - S.D. Tex.
Jabil Circuit, Inc.	09/19/2006	USDC - M.D. Fla.
Juniper Networks, Inc.	07/17/2006	USDC - N.D. Cal.
KLA-Tencor Corp.	06/29/2006	USDC - N.D. Cal.
Marvell Technology Group	10/06/2006	USDC - N.D. Cal.
Maxim Integrated Products	02/05/2008	USDC - N.D. Cal.
Meade Instruments, Inc.	09/27/2006	USDC - C.D. Cal.
Mercury Interactive Corp.	08/19/2005	USDC - N.D. Cal.
Michaels Stores, Inc.	09/06/2006	USDC - N.D. Tex.
Monster Worldwide, Inc.	03/15/2007	USDC - S.D.N.Y.
Newpark Resources	11/09/2006	USDC - E.D. La.
Openwave Systems Inc.