Pension Fund Wins First Court Round in Options Backdating Probe

April 6, 2007 (PLANSPONSOR.COM) - A Delaware state judge has turned away a request to dismiss a shareholder lawsuit seeking documents generated during investigations into possible stock options backdating by Countrywide Financial Corp.

Vice Chancellor John Noble of the Court of Chancery refused to throw out the so-called “books and records” action filed by the Louisiana Municipal Police Employees Retirement System, the Associated Press reported. The pension fund says it wants to look into an alleged suspicious pattern of options grant timing by the Calabasas, California-based home lender.

Countrywide has not admitted to any irregularities in connection with the timing of its options grant. To get a court order requiring Countrywide to hand over documents, the shareholder must prove it has a proper purpose, including credible grounds for suspecting wrongdoing has occurred, according to the news report.

“Something looks amiss,” shareholder attorney Michael Barry argued, pointing to a series of options grants by Countrywide coinciding with low market prices for the stock, the news report indicated.

Noble cleared the way to an April 18 trial for the books and records action, in spite of what he called “substantial” factual arguments that support Countrywide’s insistence that it is innocent of stock options wrongdoing.