In a press release, the company said the regular practice involved choosing a grant date corresponding to the lowest closing stock price during approximately a one to two week period after the new employee’s start date. Additionally, in several instances, “in order to select favorable exercise prices for certain newly hired executives or other senior personnel,” employment records would be manipulated to establish start dates that preceded the date they actually began working for Microtune, the company said.
The investigation also found that certain other stock option grants were backdated to dates that preceded the company’s decision to make the grants, and, in two instances, stock option grants were re-granted to take advantage of a date with a more favorable price.
According to the release, the committee concluded there was no intentional wrongdoing by current CEO James Fontaine, who was appointed CEO on August 12, 2003. The investigation found erroneous exercise practices that affected the company’s stock-based compensation charges, but the committee concluded those practices were unintentional.
Microtune determined it will need to restate certain financial statements and related footnote disclosures during years 2001 through 2005, and the first quarter of 2006.The company also said stock options granted that were intended to qualify as Incentive Stock Options did not actually qualify as such, and it intends to enter into settlement discussions with the Internal Revenue Service regarding those instances and to evaluate to what extent it should record a contingency on its financial statements with respect to any related potential tax liabilities.
Microtune said it had been communicating with the Securities and Exchange Commission (SEC) during the course of the investigation and will inform the SEC of its findings. The firm’s Chief Financial Officer, General Counsel, and Board of Directors were also cleared of any wrongdoing by the investigation.
The company press release, with additional findings of the investigation and recommendations of the Audit Committee is here .