wsj: Brooks Automation Cites
'False' Options Document
By CHARLES FORELLE and JAMES BANDLER
August 1, 2006; Page A3
Brooks Automation Inc. said two former outside directors and its former chief executive signed a "false" document permitting the executive to exercise an expired stock option for millions of dollars in profit.
The disclosure came as the Chelmsford, Mass., maker of semiconductor equipment restated several years of earnings to account for options-related accounting problems.
The two directors who signed the document, Roger D. Emerick and Amin J. Khoury, stepped down from the board in May. Robert Therrien, the former chairman and chief executive officer, left the CEO position in 2004 and retired as chairman earlier this year.
None of the men could be reached for comment.
The option in question was set to expire in August 1999, and filings from the time record Mr. Therrien's exercising it just in the nick of time -- two days before the deadline.
But in yesterday's filing discussing the restatement, Brooks said the transaction actually occurred months later. The exercise was permitted because a document signed by Messrs. Emerick, Khoury and Therrien in November described a loan, which they had purportedly discussed in June, to Mr. Therrien so that he could exercise the options before they expired. "Pursuant" to the document, "Mr. Therrien was deemed to have been granted a loan as of August 1999," Brooks said in yesterday's filing.
But a probe by a special committee of directors found that the document "was false as there were no discussions concerning a loan in June 1999," and determined that "Mr. Therrien misrepresented the facts of the loan."
The option carried a strike price of $2.43, and Brooks shares were trading at around $28 in November 1999, so Mr. Therrien made a profit of approximately $5.8 million. He repaid the loan, which was for $546,750, plus interest, according to a Brooks proxy filing.
In the restatement, Brooks recorded Mr. Therrien's profit from the expired option as compensation expense; in all, including the charges for wrongly dated grants, Brooks added about $60 million to its expense from 1996 through Sept. 30, 2005.
Federal prosecutors and the Securities and Exchange Commission are probing the company's options practices. Prosecutors have subpoenaed documents relating to the loan.
In its filing, Brooks said options were generally granted by way of "written consents signed by one or more directors" that carried "effective" dates. Brooks said in the filing that it erroneously used the effective dates to determine when options were granted, instead of the date on which the last director whose approval was required returned an executed consent document, as accounting rules say.
Robert Woodbury, Brooks's chief financial officer, said in an interview that some directors returned consents promptly, but others sometimes could take "weeks" to do so, which could mean a significant time lag between the options' stated grant date and the actual approval. Mr. Woodbury said the review, conducted by an outside law firm, an outside accounting firm and a special committee of directors, found "no evidence" of intentional backdating of options grants. He declined to identify the firms or say which directors were on the committee.
In at least one case, according to the Brooks filing, grants to "multiple employees" were treated as effective before the company had figured out which employees would get how many options.
Mr. Woodbury said some consents had preprinted dates and others had blank spaces for the dates to be filled in, and it sometimes wasn't clear when the consents had actually been signed. He described what the review found as "crazy, stupid accounting errors." He declined to discuss details of the loan to Mr. Therrien.
Mr. Therrien's grants frequently were dated at the bottom of dips in the company's stock price and ahead of quick run-ups in the share price; his unusual pattern was described in a March article in The Wall Street Journal. The odds of such a consistent pattern occurring randomly, according to the Journal's analysis, were one in nine million.
Also unusual were grants dated May 31, 2000, to Messrs. Khoury and Emerick, as well as Mr. Therrien and others, at the nadir of a sharp dip.
Messrs. Khoury and Emerick were the sole directors on the compensation committee that year, as well as the only directors to receive the May grant. Mr. Woodbury said the review found nothing suggesting manipulation of the grants' timing. He said it is "not clear" why only those two directors got the grant. He also said the fortuitous timing of options grants to Mr. Therrien, year in and year out, appeared to be coincidental. |
