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Backdating Backlash

4:30 PM -- If youve been reading the financial news lately, you know that investigations into the timing of stock option grants are definitely in vogue.

That’s the type of SEC investigation Brocade has lived with for 17 months now, prompting the resignation of CEO Greg Reyes. (See Brocade Eyes SEC Settlement and Brocade Switches CEOs, Restates .) A rash of other companies in recent weeks have been subpoenaed by the SEC or identified by the Center for Financial Research and Analysis or analyst firms as having granted options at fortunate times for executives.

The SEC wants to know if companies backdated stock options or changed the date of an option grant to a date when the stock price was low ensuring the executives would make money.

The latest list of companies identified as having backdated options includes a bunch of tech companies, some with storage products, such as F5, Broadcom, Juniper, and Vitesse. The list even touches the pristine world of tech publishing with CNET Networks (Nasdaq; CNET). (See Vitesse Execs Get the Axe and Options Scare Hits SafeNet, Juniper.) And AMCC today said it would investigate its own stock option grants. (See Vitesse Execs Get the Axe.) So far, no pure-play storage companies have been identified outside of Brocade.

At least one Wall Street analyst, Paul Mansky of Citigroup, thinks it will stay that way. Mansky conducted his own analysis of the situation by collecting share performance figures for Brocade, EMC, Emulex, Network Appliance, QLogic, and Western Digital over 30-day periods before and after option grant dates. He divided the results into two sections: pre-Sarbanes Oxley (1997-2002) and post-Sarbanes Oxley (2003-2004).

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