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Pastimes : Investment Chat Board Lawsuits -- Ignore unavailable to you. Want to Upgrade?

To: Jeffrey S. Mitchell who wrote (4202)	2/7/2003 10:10:29 PM
From: EL KABONG!!!	Read Replies (2) \| Respond to of 12465

I would like to notify everyone, that by posting this news article, I hereby rescind any losing trade/transaction/investment that I may have made during the bubble years... <g> online.wsj.com Sprint Officers Proposed Bold Tax Shelter in 2000 Senior Executives, Ernst & Young Brought Plan to the SEC, Which Flatly Rejected It By JANET WHITMAN and PHYLLIS PLITCH DOW JONES NEWSWIRES NEW YORK -- Faced with giant tax bills back in late 2000, senior Sprint Corp. executives considered a plan to avoid paying taxes that was much bolder than the controversial tax shelters that led to a management shake-up in recent weeks, according to people familiar with the matter. Senior Sprint executives and their accountants Ernst & Young traveled to Washington, D.C., to persuade regulators to allow them to unravel the exercise of stock options, as if the transactions had never happened, these people said. The executives had cashed in hundreds of millions of dollars in stock options in early 2000. Not long after, Sprint's stock price cratered, leaving the executives with shares worth less than the hefty tax bills created from the stock options they had exercised. To avoid paying the taxes, the executives wanted Sprint to reacquire the stock without significant accounting consequences to the company. "They wanted to just tear it up as if nothing happened," said one person familiar with the plan. Accountants at the Securities and Exchange Commission flatly rejected the idea. Sprint opted not to pursue the questionable strategy because the cost under the accounting treatment proposed by the SEC would have been too great to the company. A company spokesman declined to comment except to say the firm decided not to rescind the exercise of the executives' stock options. He added senior executives were unavailable to comment. Stock-option tax liabilities are still haunting several senior executives at Sprint. The Westwood, Kan., telephone company is forcing out its two top executives as part of a boardroom dispute over their use of a controversial tax shelter that is under scrutiny by the Internal Revenue Service. Chairman and Chief Executive William Esrey and President and Chief Operating Officer Ronald LeMay may face personal bankruptcy if the IRS is successful in challenging the legality of the complicated two-part shelter transactions proposed by Ernst & Young. Other executives at Sprint also face hefty tax bills because of options that they exercised as the company's stock price peaked. Sprint was by no means the only former highflier to face such a dilemma. In 2000, after the stock-market bubble burst, plenty of executives at other companies were saddled with tax bills they couldn't pay because the options they had exercised were suddenly under water. A number of those companies, in particular Silicon Valley technology concerns, considered the same escape route as Sprint -- forgiving stock options that were exercised during the boom. Amid signs some companies had already made such moves, regulators in Washington moved quickly to come up with fresh guidelines that made such moves less appealing for firms. "I can guarantee you that Sprint was not the only one that looked into this," said one person familiar with the Sprint proposal. "My sense is that a lot of accounting firms told their clients that this was fine. All the companies wanted to treat it as if there was no accounting impact." The problem appeared widespread enough that SEC staff quickly issued a ruling on how to account for such transactions. Regulators determined that companies who opt to rescind exercised employee stock options must clearly disclose the terms of such transactions. Under the SEC ruling, companies also would forfeit the original tax deduction received from the exercise of options and become subject to significant compensation expenses. Though a burden for firms, rescinding exercised stock options would be a huge relief to executives facing big tax bills. An employee who exercised stock options could avoid paying taxes if the options were rescinded within the year they were exercised. "The rescission rule is pretty onerous for companies," said Robert Willens, accounting specialist with Lehman Brothers. "It would entail substantial charges, even though it works beautifully from an individual's tax rule perspective." Write to Janet Whitman at janet.whitman@dowjones.com and Phyllis Plitch at phyllis.plitch@dowjones.com Updated February 7, 2003 8:51 p.m. EST KJC