Jabil circuit sec investigation backdating
Grants may need to be adjusted from as far back as 1996.The company has responded to an informal inquiry from the SEC and a subpoena from the U. Attorney's Office for the Southern District of New York, and it continues to cooperate with both.Jabil Circuit ( JBL) failed to file its annual report on time due to its ongoing stock options backdating investigation, which is still incomplete, the company said Friday.Jabil said it missed submitting its 10-K for the fiscal year ended Aug. 29 filing date set by the Securities and Exchange Commission.25 (“APB 25”), which requires that options be recorded as a compensation expense to the corporation upon issuance if the exercise price is below fair market value. Second, plaintiffs alleged that the individual defendants engaged in insider trading in violation of Section 10(b) and Rule 10b-5, as well as Section 20A of the 1934 Act. The Eleventh Circuit held, however, that the allegations of the amended complaint, viewed individual and in the aggregate, failed to raise a “cogent and compelling” inference that the company and its senior management acted intentionally or with severe recklessness in connection with Jabil’s accounting for stock options.In the wake of an article by the Wall Street Journal surmising that Jabil’s CEO may have received backdated stock options because the options he received were consistently timed at a low price and followed up by a significant price increase, and an informal investigation by the SEC, Jabil formed a special committee to examine the allegations. Third, plaintiffs alleged that defendants made false projections regarding the company’s business conditions in violation of Section 10(b) and Rule 10b-5. Among other things, plaintiffs did not plead particularized facts indicating that the individual defendants knew that any accounting standard was being violated or plead each individual defendant’s trading history to support a showing that his class period stock sales were “dramatically” out of line with prior trading practices or otherwise sufficiently suspicious to support a strong inference of scienter.
Jabil said last month that it would need to restate its 2005 financial statements due to incorrect options grant dates, but was still unsure if it would need to restate other time periods.
By launching the probe, Apple becomes perhaps the highest-profile example of dozens of technology companies where the possible backdating of executive option grants have come under scrutiny.
Many firms have received subpoenas, either from the Securities and Exchange Commission or federal prosecutors, asking for information related to such grants.
For further information, please contact John Stigi at (213) 617-5589 or Christopher Loveland at (202) 772-5313.
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