Options probe hits Pixar
Number of top executives could be at the center of inquiry
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Options given to a number of Pixar execs between 1997 and 2003, including chief creative officer John Lasseter, are thought to be at the center of the inquiry. Probe's ramifications would likely be felt by those who granted the options, not those who received them.
News comes as another Silicon Valley company run by Steve Jobs, Apple, remains embroiled in an options scandal.
On Friday the firm revealed it backdated nearly 6,500 options out of 42,000 between 1997 and 2002, but defended Jobs' role in the backdating.
Backdated options occur when em-ployees are given options (the right to buy stock at a certain price, usually the market price on the date the option is given) stamped with a date known in retrospect to be the period low for the stock price. This allows the employee to receive a greater benefit from any increase in the stock's price.
While it is difficult to prove, the pattern of a number of execs receiving options with favorable dates suggests backdating has occurred. While backdating isn't always illegal, it can be if it's not disclosed to or approved by inves-tors and the board.
Pixar investigation extends at least back to last summer, when a perusal of company filings revealed Lasseter and Ed Catmull had received options with questionable dating.
Catmull received 1 million options and Lasseter received 2 million on Dec. 6, 2000, at the price of $13.25, accord-ing to SEC filings.
Price was the low for the period.
Lasseter also received options in 1997, shortly before the company signed a five-movie deal with Disney that sent the stock price up. If the options were given because the com-pany knew it was about to sign a pact, it could have been a similarly questionable case of what financial experts call "springloading."
If Catmull's and Lasseter's options were backdated or springloaded, execs could have automatically pocketed, on paper, as much as $12 million in Lasseter's case and $6 million in Catmull's.
All told, Pixar execs received op-tions dated with period lows in 1997, '98, 2000 and '03, an improbable set of occurrences.
SEC scrutiny is hardly proof of wrongdoing, nor does this investigation differentiate Pixar from the scores of other companies that have received inquiries from the agency.
Still, the investigation's results could have a significant impact.
In the past, consequences for the executives who received or handed out the options have been wide-ranging. In some instances of an SEC investigation there hasn't been so much as a fine. In others, such as with tech-storage firm Brocade, it has resulted in criminal charges against former execs.
An estimated 18 CEOs have lost their jobs, and nearly 200 companies have been investigated as a result of the scandal. Exec anklings typically have involved those who oversaw or ap-proved options, not those who received them.
Although Pixar was not yet owned by Disney at the time in question, the Mouse House has launched its own internal investigation, following the precedent of other companies that have seen divisions or employees come under SEC scrutiny.
Pixar had a solid financial year in 2006, grossing $456 million in domes-tic and foreign box office for "Cars" in a year when a number of animated movies struggled.
A call to a Pixar spokesman was not returned.
Friday's news comes one day after Apple restated earnings because of the options issue after a special internal investigation led by board member Al Gore, among others, turned up cases of backdating.
Topper Steve Jobs helped select the dates for some of the nearly 6,500 questionably timed options, but was not overseeing the options program and would not be considered responsible by the company, the filing said.
Jobs himself also received two grants of questionable timing --including 7.5 million options on Oct. 19, 2001.
On Friday, Apple acknowledged a supposed special board meeting author-izing the Jobs options had not taken place. It also said it was taking a charge of $20 million as a result of the Jobs options grant, and a total charge of $84 million for the nearly 6,500 questiona-bly timed options.
The company pointedly said there's no evidence "that any current member of management was aware of this irregularity," suggesting it believed two former execs -- possibly former chief financial officer Fred Anderson and former legal counsel Nancy Heinen, as some accounts have suggested -- were granting the options.
An estimated eighteen CEOs have lost their jobs, and nearly 200 companies have been investigated, as a result of the scandal. Exec anklings have also typically involved those who oversaw or approved options, not those who received them.
Though Pixar was not yet owned by Disney at the time in question, the Mouse House has launched its own internal investigation, following the precedent of other companies who have seen divisions or employees come under SEC scrutiny.
Pixar had a solid financial year in 2006, drawing $456 million in domestic and foreign box office for "Cars" in a year when a number of animated movies struggled.
A call to a Pixar spokesman was not returned.
Friday's news comes one day after Apple restated earnings because of the options issue after a special internal investigation partly led by board member Al Gore turned up cases of backdating.
Topper Steve Jobs helped select the dates for some of the nearly 6,500 questionably timed options but was not overseeing the options program and would not be considered responsible by the company, the filing said.
Jobs also himself received two grants of questionable timing--including 7.5 million options on October 19, 2001, which was approved on December 18 but backdated to October, before the company's stock had risen more than 15%.
On Friday, Apple acknowledged that a supposed special board meeting authorizing the Jobs options had not taken place. It also said it was taking a charge a charge of $20 million as a result of the Jobs options grant, and a total charge of $84 million for the nearly 6,500 questionably-timed options.
The company pointedly said that "there was no evidence, however, that any current member of management was aware of this irregularity," suggesting that it believed two former execs -- possibly former CFO Fred Anderson and former legal counsel Nancy Heinen, as some accounts have suggested -- had been those granting the unfavorable options.
