Class-action lawyers pursuing an options-backdating suit against digital-media chip maker Zoran over options backdating “arbitrarily picked a stock price in the past that made the deal look more valuable than it was,” thus showing themselves willing to “engage in a little backdating themselves,” reports Daniel Fisher in Forbes. Lawyers at Seattle’s Keller Rohrback
portrayed themselves as having achieved $1.6 million in value and wanted $1.2 million in fees for their work. Using the stock price on the day the settlement was filed with the court, however, U.S. District Judge William Alsup said, the settlement would be worth perhaps $200,000 and possibly nothing at all. …
The lawyers painted the value of the package as $1.6 million, based on a Dec. 3, 2007, stock price of $21.99 a share. When Alsup asked how they arrived at that date, lawyers first indicated that was when they had signed a memorandum of understanding, but when Alsup ordered a copy of the memorandum, it turned out to have been signed Dec. 21 and wasn’t filed with the court until Feb. 26. By then Zoran’s stock was down 50%, and the options concessions were worth far less.
Faced with a tongue-lashing from Judge Alsup over the “collusive settlement” — and the prospect of few or no fees — the lawyers went back and returned with what appears a considerably enriched settlement offer from Zoran. (“Fee Fixers”, Jun. 9; Zusha Elinson, “Federal Judge Rejects Easy Options Deals”, The Recorder, Apr. 25). Update Jun. 18, from Recorder: judge approves revamped settlement.
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