11, 2006 Take-Two reveals “improprieties” in auditing.7 Jan.
22, 2007 Take-Two implicates Ryan Brant in backdating stock options.8 Mar.
In the plea agreement, Donlan admitted that between November 2002 and November 2003 he used his position as WFI’s stock option administrator to issue without authorization 728,229 shares of WFI stock to a brokerage account he controlled, and that he sold the stock for a net gain of ,252,794.
He also admitted that he evaded paying ,202,917 in federal income taxes for the calendar years 20 by failing to declare the income he derived from the fraudulent WFI stock sales.
Some executives and attorneys argue that most backdating violations were simply technical errors that meant little to investors.
The tech industry has long made extensive use of options, giving employees the right to buy company stock at the price for which shares were selling when the options were granted — which means they reap a profit if the price subsequently goes up.
The direct cost to the employer is minimal, but accounting rules require companies to report the options as a noncash expense.
“I do think it was a real wake-up call for the industry, just given the number of people caught up in improper conduct,” said Marc Fagel, regional director for the SEC in San Francisco.
Backdating became a big issue in Silicon Valley in 2006, when authorities began investigating scores of companies here and around the United States.