Options Grant to Dead Exec Leads to $34.4 Million Settlement

[WSJ_law_blog]

There’s been a settlement in one of the more bizarro episodes of the stock-options backdating epidemic. In the fall of ‘06, the WSJ reported that Cablevision had awarded options to a deceased vice chairman, while making it appear as though the options had been granted prior to his 1999 death.



According to a company filing, Marc Lustgarten, Cablevision’s former chief negotiator and a close confidant of Charles Dolan, the company’s founder, received at least 400,000 options after his death (though it was unclear which of the options grants to Lustgarten was backdated). Also revealed in an SEC filing was an improperly-awarded grant to a compensation consultant, which had been awarded as if he were an employee.

In the WSJ’s 2006 story, Brian Foley, a compensation consultant, summed up the situation at Cablevision nicely. While the dollar amounts of Cablevision’s restatement were relatively small compared with restatements at other companies with stock-options timing issues, he said, he was surprised by the depth and range of the problems unearthed by the investigation. “Once you take the lid off and look inside, you realize that the short rubber boots aren’t going to do and you need the hip-waders,” said Foley. “How could you have this many things go awry?”

Today, according to an AP report (via Forbes), Cablevision has said in a regulatory filing that it settled lawsuits stemming from those grants. Under terms of the settlement agreement, certain present and former Cablevision directors and execs will pay Cablevision $24.4 million, while Cablevision’s liability insurer will kick in another $10 million. Cablevision has also agreed to adopt a number of corporate governance changes relating to stock-based compensation awards.

The case — brought as a class action and a derivative action on behalf of Cablevision shareholders — was helmed by Stuart Grant and Megan McIntyre, of Grant & Eisenhofer. They were joined by lawyers from Shiffrin Barroway and Shapiro Haber & Urmy.

On Cablevision’s side was S&C’s Gandolfo “Vince” DiBlasi, while Alston & Bird’s Nelson Boxer represented Cablevision’s special litigation committee.