Sunday, May 21, 2006

FEDS FOCUS ON BACK-DATING EXEC'S OPTIONS --
Nashville-based Caremark Rx Inc., a pharmacy-benefits management company whose fortunes have shot up since Edwin M. "Mac" Crawford took over as chief executive in 1998, was named last week in a widening federal investigation into corporate stock option programs.

On Thursday, the company stated that it had received a grand jury subpoena from the U.S. attorney for the Southern District of New York as well as a letter of informal inquiry from the Securities and Exchange Commission.

In addition to an inquiry about stock options, the SEC requested documents about the company's executive relocation program. Caremark moved its headquarters from Birmingham to Nashville in 2003.

The stock-option inquiry appears to be part of a broader probe into whether companies had backdated stock option grants to their executives to coincide with low stock prices. U.S. securities regulators and prosecutors have sought information from at least 12 companies, including UnitedHealth Group and Vitesse Semiconductor Corp.
The issue here is whether boards are inflating the value of options awarded to executives by manipulating the date when the value is set.