EA Sued Over Options Grants

A labor union alleges backdating.
Publish date:

Updated from 4:31 PM EDT

Electronic Arts


announced Thursday that it is the subject of a shareholder suit over its past stock-options grants.

The suit was filed Wednesday in the California superior court for San Mateo County, EA said in a regulatory filing. The lead plaintiff in the case is Plumbers & Pipefitters Local No. 572 Pension Fund, which previously sued

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in a related matter.

The suit "alleges, among other things, purported improprieties in the company's issuance of stock options," EA said in the filing.

EA spokesman Jeff Brown declined to comment on the lawsuit but said the company recently reviewed its last 10 years' worth of options grants and found no evidence of any problems. In particular, the company did not find any instances of backdating or spring-loading, two issues that have been at the forefront of the broader investigation by federal officials and others into public companies' past options grants.

The suit alleges backdating dating back into the early 1990s, including grants that EA has not yet reviewed. Brown noted that those grants have expired by now, but that the company is in the process of examining them as well. The company doesn't expect to find any problems with those grants either, Brown indicated.

"Backdating has never been an accepted practice at EA," said Brown. "We've always had strong processes in place to prevent this."

The announcement followed the close of trading on Thursday. In after-hours trading following EA's filing, the company's stock was up 42 cents, or about 0.9%, to $48.90.

EA is only the latest company to come under scrutiny for its options-granting practices. The

Securities and Exchange Commission

, for instance, has said that it is investigating more than 80 businesses. Several other companies are, like EA, the subject of shareholder suits or internal investigations, but haven't acknowledged that they've been contacted by federal authorities.

The broader options probe has generally been concerned with investigating allegations of backdating, as corporate insiders are accused of retroactively assigning to options a grant date on which their company's stock was known to have hit a short-term low.

EA is the fourth of the four big independent U.S. game publishers to draw scrutiny for its options.


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have all previously acknowledged that the SEC is taking a look at their past grants.

Brown declined to say whether EA is the subject of an inquiry by the SEC or by federal prosecutors.

Shares of EA closed regular trading off 4 cents, or less than 1%, at $48.48 on Thursday.