Foundry Finds Backdating

Shares rise on plans for a restatement.
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shares jumped 3% after the company gave itself an all clear on its internal stock option review and restatements.

The Santa Clara, Calif., networking gearmaker says it has emerged from a review of its stock option grant backdating practices in good shape, despite a $15 million tab for investigation costs.

Foundry's auditors found 151 of its 189 option grants were misdated and says it will record a total charge of $102.5 million to properly record stock compensation expenses dating back to 1999, according to the company's annual report filed Thursday.

Among the findings of Foundry's special committee report was that "in a substantial number of cases" CEO Bobby Johnson picked grant dates "after the grant dates recorded in our books."

The report goes on to say that Johnson didn't receive any of these backdated options and that he was never told that the backdating "would result in a misstatement of our financial results."

Foundry still faces an ongoing informal inquiry by the Securities and Exchange Commission and an investigation by the Justice Department, but the fact that Johnson didn't appear to be lining his own pockets seems likely to put him in the clear.

Foundry is among the most recent companies to conclude internal probes that were launched last year as part of a huge crackdown on the practice of changing the dates on grants to pump up the value of the stock option.

Dozens of companies were pulled under an accounting spotlight that has helped reveal rampant backdating practices, but to date there have been few glaring legal ramifications. For the most part, the whole backdating issue remains a minor annoyance for investors.

In one of the higher profile cases,


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and its CEO Steve Jobs were cleared in April by the SEC of any backdating charges after the company concluded its own investigation. Apple's former finance chief Fred Anderson, however, agreed to pay back more than $3 million relating to a backdated option. He also paid a small fine to settle the SEC case without admitting any wrongdoing.

Some backdating cases took a different turn, as at



, where top executives have been charged with fraud related to option grants. Former Comverse CEO Kobi Alexander, ex-finance chief David Kreinberg and onetime senior general counsel William Sorin were charged in August with defrauding shareholders by backdating options.

Kreinberg and Sorin pleaded guilty charges of conspiracy to commit fraud. Kreinberg agreed to cooperate with federal prosecutors. Alexander fled to Namibia and was arrested there in September. He faces an extradition hearing later this month.

Foundry joins other big tech shops like


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that have now accounted for their backdating expenses. And if Apple's case is any indication, regulators may be willing to repeat the company's all clear sign.