This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

TechWeek: Mercury Played by Own Rules

If you've been following the sad saga of options backdating at Mercury Interactive (MERQ), you already know that something went seriously wrong at the business software maker.

But if you haven't read Mercury's recent regulatory filings, you have no idea how bad things got. Simply put, the former management team made up the rules as it went along -- and not just about options -- and the board of directors did exactly nothing to stop them.

Sure, those are harsh words. But consider these points made in the company's recent filings:

  • The special committee of the board that investigated the matter found 54 instances of backdated option grants.
  • Grants were made to people before they became employees, and in some cases after their employment status was unclear
  • .
  • Exercise dates for options exercised by some executives were apparently reported incorrectly -- and "In each case, the price of our common stock was substantially lower on the reported exercise date than on the date the option was actually exercised."
  • That last point has a hidden catch for shareholders, according to the filings. The misdating had the effect of lowering taxable income for the executives, and that, in turn, results in a potential penalty to the company for failing to pay the right amount of withholding tax.

    Then there's the little matter of a $1 million loan made to ex-CEO Amnon Landon that may not have been approved by the board. In any case, supporting documentation was lacking, although the loan has since been repaid.

    There's also a tantalizing reference to "certain inappropriate expense reimbursements that were made to our former CEO." That phrase appears a number of times in the document, but nowhere is it explained. I called Mercury to find out, and a spokesman refused to comment. Isn't that something shareholders have a right to know? I guess not.

    But wait, there more. Landan, former CFO Sharlene Abrams, who left in 2001, and possibly others (the filing is not clear on this point), overrode internal controls "to manage or influence the timing of quarter-end shipments and influence the timing and level at which certain expense items and accruals were recorded to achieve a desired consistency of reported financial results."
    1 of 2

    Check Out Our Best Services for Investors

    Action Alerts PLUS

    Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    Quant Ratings

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    Stocks Under $10

    David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    14-Days Free
    Only $9.95
    14-Days Free
    Dividend Stock Advisor

    David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Updates with exact steps to take - BUY, HOLD, SELL
    Trifecta Stocks

    Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

    Product Features:
    • Model Portfolio
    • Intra Day Trade alerts
    • Access to Quant Ratings
    Real Money

    More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

    Product Features:
    • Access to Jim Cramer's daily blog
    • Intraday commentary and news
    • Real-time trading forums
    Only $49.95
    14-Days Free
    14-Days Free
    CA $29.66 0.00%
    HPQ $12.27 0.00%
    AAPL $93.74 0.00%
    FB $117.58 0.00%
    GOOG $693.01 0.00%


    Chart of I:DJI
    DOW 17,773.64 -57.12 -0.32%
    S&P 500 2,065.30 -10.51 -0.51%
    NASDAQ 4,775.3580 -29.9330 -0.62%

    Free Reports

    Top Rated Stocks Top Rated Funds Top Rated ETFs