Faulty financial papers costing Washington County firm $44 million
Lax or nonexistent documentation of stock options granted by Black Box Corp. to its executives so far has cost the company $44.7 million in expense charges, according to new securities filings.
The Lawrence, Washington County-based technical services company has been conducting an internal investigation of financial statements dating back to 1992. Since the options-backdating scandal broke about a year ago, more than 180 companies have received at least a notice of an informal request for information from the Securities and Exchange Commission.
Some 300-plus pages of restated quarterly financial results dating back to 2005 were filed late Tuesday. The probe was triggered by a informal inquiry letter last November by the SEC. The scrutiny of the company has evolved into a formal investigation of Black Box's stock option practices.
While not mentioned in yesterday's financial restatements, one casualty of the company's stock option problems is believed to have been Fred C. Young, who resigned in May following nine years as the company's chief executive.
A Black Box spokesman could not be reached for comment.
After-tax charges through Dec. 30 for the stock option mistakes totaled $44.7 million, the new filings show. In addition, related legal and other fees have cost Black Box about $600,000, although the company hopes some of the expenses will be reimbursed by insurance. The company indicated that still-to-be-determined tax liabilities could add another $3.6 million or more to the total expenses.
"During the review period, few option grants were approved in complete compliance with the company's stock option plans," Black Box said in the filings. According to audit committee findings, "there is either no or inadequate documentation of approval actions that satisfies the requisites for establishing a measurement date," upon which options are granted.
Of the 69 stock option grant dates recorded during the examination period, there were proper approvals for only 12, the audit committee found. Some approval documents are inconsistent or conflict with other documents, rendering them unreliable, the committee said.
The documents state the audit committee and other relevant board committees will continue to review and implement procedural enhancements and remedial actions.
Black Box said in a filing yesterday that the Nasdaq stock market granted its request to continue listing its common stock, provided that Black Box file its annual report by Aug. 13 for the year ended March 31.
Black Box's stock closed yesterday at $42.64, down 92 cents.