Even though the current subprime litigation wave seemingly has swept the prior scandal into the past, lawsuits based on options backdating allegtions stubbornly continue to come in. Within recent days, plaintiffs’ lawyers have filed two new options backdating-related derivative lawsuits. The options backdating scandal may now be well over two years along, but it continues to generate new litigation activity and controversy.
First, as described in an August 1, 2008 article in the Seattle Intelligencer (here), on July 17, 2008, a shareholder filed a lawsuit in King County (Wash.) Superior Court on behalf of Costco Wholesale Corp. against 20 of its current and former directors and officers. According to the article, the suit seeks “unspecified financial damages and internal company reforms.” A copy of the complaint can be found here.
Second, as discussed in a July 30, 2008 Kansas City Star article (here), on July 29, 2008, a shareholder of Epiq Systems filed an options backdating-related shareholders derivative lawsuit on the company’s behalf against nine current and former directors and officers. A copy of the complaint can be found here.
The Epiq complaint alleges that the company “has secretly backdated millions of options to its top officers and directors for nearly a decade, reporting false financial statements and issuing false proxies to shareholders.”
With the addition of these two most recent lawsuits, my current tally of the total number of options backdating-related derivative lawsuits now stands at 168. The number of options backdating-related securities class action lawsuits stands at 39, including two new lawsuits filed in 2008. My updated list of the options backdating-related lawsuits can be found here.
Regular readers know that I have also been tracking options backdating-related case dispositions and settlements (here). Though the list of dispositions and settlements is now quite lengthy, the reality is that the vast majority of the options backdating cases are yet to be resolved. The fact that so many remain unresolved, together with the fact that new lawsuits continue to be filed, suggest that it will be quite some time before all of the options-backdating litigation is finally put to rest.
Special thanks to a loyal reader for the link to the Epiq article and for information about the Costco case.
Thoughts About Crisis Longevity: It is worth contemplating the likely long duration of the options backdating phenomenon in the context of the current subprime and credit crisis litigation wave. The subprime and credit crisis problems are so much more pervasive and so much more serious, and it likely that the related litigation will continue to emerge for months and perhaps years to come. It may be correspondingly even longer before the full dimensions of the subprime-related litigation wave can be fully assessed.
Indeed, in the Financial Times August 3, 2008 first anniversary retrospective of the subprime crisis (here), the paper specifially notes, "A year later, there is still no sign of an end to these problems. Instead, the sense of pressure on western banks has risen so high that by some measures this is now the worst financial crisis seen in the west for 70 years."
We may have options backdating litigation around for quite a while yet, but we will be living with the consequences of the subprime crisis for years to come.
Cross-Eyed Bear: When the history of the subprime crisis is finally written, the collapse of Bear Stearns will be a key part of the narrative. By the same token, the litigation involving Bear Stearns will also be a key part of the litigation history. The amount of litigation involving Bear Stearns is massive, but an August 4, 2008 Fortune article helpfully provides a comprehensive list and overview, here.
As the article correctly notes, "fortunately for former senior Bear executives like Jimmy Cayne, Alan Greenberg and Alan Schwartz, J.P. Morgan Chase agreed to indemnify Bear’s officers and directors for six years against these lawsuits."
Really Big Box Stores: I was surprised to learn, while writing this post, that Costco is as big of a company as it is. The companies’ current market capitalization is approximately $27 billion, with annual sales (2007) of $64 billion.
By most measures, those statistics would qualify Costco as a big company. But its competitor big box retailer Wal-Mart Stores manages to make Costco look modest by comparison. Wal-Mart’s current market cap is $230 billion and its 2007 sales were $378 billion.
If Wal-Mart were a country, and if its revenue were supposed to be equivalent to GDP, Wal-Mart would be the 25th largest economy in the world (according to the rankings of the International Monetary Fund, here) — larger than Saudi Arabia, Austria or Greece. Or as big as Kuwait, New Zealand and Algeria combined. That’s big.
If you are still straining to comprehend how big Wal-Mart truly is, you may want to check out this amazing animation video (here) depicting the efflorescence of Wal-Mart stores across a map of the United States. Wal-Mart is amazing, this video simply makes that fact easier to grasp.
A very special hat tip to Tom Kirkendall at the Houston’s Clear Thinkers blog (here) for the link to the cool Wal-Mart growth video. Kirkendall’s site also links to this very cool BBC video (here) tracking electronically the balletic conduct of commerce in the British Isles.