This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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

    Select the service that is right for you!

    Action Alerts PLUS
    Try it NOW

    Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    • Weekly roundups
    TheStreet Quant Ratings
    Try it NOW
    Only $49.95/yr

    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
    • Upgrade/downgrade alerts
    Stocks Under $10
    Try it NOW

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

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    • Weekly roundups
    Dividend Stock Advisor
    Try it NOW

    Jim Cramer's protege, 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
    • Alerts when market news affect the portfolio
    • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
    Real Money Pro
    Try it NOW

    All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

    Product Features:
    • Real Money + Doug Kass Plus 15 more Wall Street Pros
    • Intraday commentary & news
    • Ultra-actionable trading ideas
    Options Profits
    Try it NOW

    Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

    Product Features:
    • 100+ monthly options trading ideas
    • Actionable options commentary & news
    • Real-time trading community
    • Options TV
    To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
    Submit an article to us!


    DOW 18,030.21 +6.04 0.03%
    S&P 500 2,081.88 -0.29 -0.01%
    NASDAQ 4,773.4720 +8.0480 0.17%

    Brokerage Partners

    Rates from

    • Mortgage
    • Credit Cards
    • Auto

    Free Newsletters from TheStreet

    My Subscriptions:

    After the Bell

    Before the Bell

    Booyah! Newsletter

    Midday Bell

    TheStreet Top 10 Stories

    Winners & Losers

    Register for Newsletters
    Top Rated Stocks Top Rated Funds Top Rated ETFs