Options backdating scorecard
In an earlier version of the paper, our sample consisted of six full settlements, and we stated that 37 companies had been the target of federal shareholder class actions with options backdating allegations.We have updated the paper to reflect our determination that all defendants in the Mercury Interactive class action have settled, to include the settlement of the Wireless Facilities, Inc.
As noted above, the Newpark Resources, Inc., settlement encompassed allegations in addition to backdating .Settlements also rise with the inclusion in the settlement of each class of security other than common stock (e.g., bonds or options).The mere existence of accounting-related allegations, as in a backdating case, tends to increase settlement size, as does an inquiry or investigation relevant to the allegations by any official body (such as the SEC, the NASD, or a state Attorney General) and an admission by the defendant company of accounting "irregularities" related to the allegations.Despite the widespread attention given to "options backdating" by investors, regulators, the legal profession, and the news media, the issue has not generated the spate of shareholder class action litigation that some observers anticipated.Of nearly 250 companies identified as potentially involved in backdating, It now appears that backdating class actions may be falling short of expectations in another respect: in the cases that have settled to date, the amounts paid to plaintiffs have been substantially lower than in comparable non-backdating class actions.
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Alternatively, it could be that the weakest cases have settled first.