The U.S. attorney for the Southern District of New York has subpoenaed records of stock options granted by Denver- based Delta Petroleum, the company said Monday.
The subpoena is the latest development in a widening stock- option backdating scandal. More than three dozen companies have disclosed that they are the subjects of regulatory, criminal or internal investigations into the way they awarded stock options to executives.
Companies grant their executives stock options as an incentive to increase the companies’ value. The option owner can buy shares later for a “strike price” based on the market price when the option was granted.
Backdating options to a time when the company’s stock was lower can increase their value.
U.S. Attorney Michael J. Garcia’s office has requested that Delta Petroleum, an oil and gas exploration company, turn over records from 1996 to the present, the company said in a release.
No one from Delta was available to discuss the investigation Monday evening.
“The company believes that this inquiry is the result of having been identified in a third party report dated May 16, 2006, as statistically being at risk for possibly backdating option grants to executive officers,” Delta said in the release.
Delta launched an internal investigation after the report, the company said. Independent legal counsel and advisers are assisting a special committee that is doing the investigation.
A finding that a company backdated options could be a violation of federal tax and other laws, said Ted Fiflis, a securities-law professor at the University of Colorado at Boulder.
“It is a serious breach of duty. It is, in effect, a taking of money almost under false pretenses,” he said.
UnitedHealth Group, CNET Networks, Affiliated Computer Services, Jabil Circuit and Caremark RX are among the companies contacted by the U.S. attorney or the Securities and Exchange Commission.
Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com.
