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Author: senegalP Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 475  
Subject: klac options backdatiing isssue Date: 5/25/2006 6:22 PM
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Hi Folks -
As you may or may not know KLA Tencor (and several other firms including Vitesse Semiconductor) were mentioned in recent Wall St Journal articles suggesting that the firms may have "backdated" options awarded to their uopper level execs ("backdating" means the option grant date was assigned after the grant to coincide with the day the stock hit some minimum price).

As an ex-KLA employee the story caught my eye. I went on the web and found this excellent link which has a lot of the details ...

http://www.biz.uiowa.edu/faculty/elie/backdating.htm

... this link is from the University of Iowa website where some of the professors who did the probability analysis post.

The WSJ articles in question are given in this post (look for the spot where they talk about the WSJ articles, the second link there is the best) and the pobability calculation methodology is given at the very bottom of the WSJ article. BTW perfectly valid and I make my living doing probability analyses.

The ramifications are that for several years an awfulk lot of options were granted to upper level tech execs at some of these firms at "fire sale" prices. This is basically theft.

Read the links and judge for yourself. I know options are an emotional topic for many and I benefitted from stock options myself whan I worked for KLA. But mine were granted at a known date, the back dating trick described here has certainly cost the stockholders of those firms (me!) an awful lot of money (when the firm buys stock to cover those shares being cashed by the execs at a now much higher price).

And it may cost them yet more to settle with the SEC.

Guess now that Sarbanes-Oxley is in force all option grants must be diosclosed by two days after grant so backdating is not so easy to do.

The link makes truly fascinating reading. Check it out. Judge for yourself. Kindly excuse any typos I may have made above, I have a damaged right hand (in a cast) which tends to complicate typing just a bit!

senegalP
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