Ten Family Dollar officials and directors, including its chief financial officer, have been sued by a shareholder, accusing them of improperly earning millions of dollars from exercising backdated stock options over six years, according to The Charlotte Observer.
The suit, filed in North Carolina’s Mecklenburg County Superior Court, alleges the individuals received options to buy stock between 1995 and 2000 “in a striking pattern that could not have been the result of chance,” according to the report. The complaint reportedly asserts that the options were issued just before a “substantial rise” in Family Dollar stock.
CFO.com could not immediately reach Family Dollar spokeswoman Kiley Rawlins for comment.
James Kelly, vice chairman and chief financial officer, is among the 10 individuals being sued. Other named defendants include directors Mark Bernstein, James Martin, and Sharon Decker.
The paper points out that Bernstein, a retired attorney, and Martin, a former governor of North Carolina, are former members of the company’s stock-option committee. Decker, CEO of The Tapestry Group, a consulting, communications, and marketing firm, is a member of Family Dollar’s compensation committee and a former member of the audit committee.
Meanwhile, another handful of retailers have reported further developments in the options backdating scandal. For example, Michaels Stores said in a regulatory filing that on September 6, the U.S. Attorney for the Southern District of New York had withdrawn a grand jury subpoena so that the matter can be transferred to the fraud section of the Department of Justice.
On July 27, Michaels officials noted that the arts-and-crafts retailer had received a grand jury subpoena from the U.S. District Court for the Northern District of Texas requesting documents relating to the granting of stock options going back to 1990. The company said it believes this subpoena is part of the transfer notice involving the DoJ. Officials have also received a letter from the Securities and Exchange Commission’s Division of Enforcement requesting that the company preserve all documents concerning its granting of stock options dating back to 1990.
Late Thursday evening, The Children’s Place Retail Stores announced it discovered errors in the granting and recording of stock options, but insisted they “were unintentional.”
Regardless of the cause of the errors, the development has forced the company to delay the filing of its quarterly report for the quarter ended July 29 to “allow time for the company to complete an analysis of the accounting treatment for its past stock option grants and to determine the extent of any corrections that may be required to its previously reported financial results.”
Meanwhile, Broadcom, a maker of semiconductors for the telecom market, said it has identified additional stock-option grants for which the measurement dates differ from those originally used to record such awards, which will cause additional noncash, stock-based compensation expense to be “at least twice the amount” previously estimated and could be substantially more, depending upon the resolution of certain accounting issues.
On July 14, Broadcom announced that its financial statements for the years 2000 through 2005, and for the first quarter of 2006, would need to be restated after determining that the accounting measurement dates for certain stock-option grants awarded during the years 2000 through 2002 differed from the measurement dates previously used in accounting for the awards. As a result, the company warned that it expected to record additional noncash stock-based compensation expense in excess of $750 million.