Cablevision Systems became the first major media company to be caught in scrutiny of backdating stock options to favor executives, acknowledging that it misdated stock awards from 1997 to 2002.
A review of the options transactions prevented Cablevision from releasing full quarterly financial statements as scheduled Tuesday, and the company expects to restate results going back nearly a decade. "Management has concluded that the financial statements for all the periods beginning January 1, 1997 should not be relied upon," Cablevision said in a statement. The company added that it will not issue a full quarterly report until the review is complete but does not know how long that will take.
The inquiry is the latest of a string of incidents that has drawn unfavorable attention to the Dolan family that controls Cablevision, including a bitter family feud between Chairman Chuck Dolan and his son, President James Dolan; an investigation into accounting practices at the company's cable network unit, and an aborted plan to take the company private.
Cablevision did not detail precisely which transactions are being reviewed. However, in recent months, federal regulators recently began investigating the obscure practice of improperly "backdating" stock options to give insiders an extra pay windfall.
Typically, the exercise price of a stock option is pegged to trading price of a company's stock the day the option it is actually awarded. If a company's stock has been on the rise, backdating the option artificially lowers the exercise price, giving executives an extra bonus by allowing them to buy shares at an even greater discount to the market price. The practice is not necessarily illegal. However executives at one company -- Brocade Communications -- face not just civil, but criminal charges over options backdating issues. More than 80 companies have admitted playing games, including Apple Corp. and Home Depot.
Cablevision says it initiated an internal review after an academic study prompted securities regulators and tax officials to look at backdating games.