BOSTON—American Tower Corp. says it intends to “vigorously defend” its stock-option granting practices in the face of two lawsuits filed just days after the company received a subpoena from a New York district attorney.
AMT said a securities class action lawsuit was filed against the company in the U.S. District Court for the District of Massachusetts, along with a shareholder lawsuit in the state of Massachusetts, alleging that current and former officers and directors were involved in unfair stock-option awards.
At issue is the illegal practice of “backdating” stock-option grants for employees, usually high-level executives. By manipulating the stock grant date of stock options, companies can match up a favorable stock price with an option after the stock market has run its course for a particular stock during a specific time period.
In effect, backdating stock options is the equivalent of lottery officials allowing lottery-ticket buyers to win the lottery by buying winning-number tickets after the winning numbers are posted.
Done legally, companies award stock-option grants as incentives, hoping that employees will work hard and in earnest to ensure that the company performs well, thus increasing its stock value. Backdating the options allows employees to benefit regardless of how the company or the stock performs.
AMT announced May 19 that it was conducting an internal review of its stock-option granting practices. On May 23, the company said it received a subpoena for information about its stock-option awards from the U.S. Attorney for the Eastern District of New York. AMT said it plans to establish a committee to evaluate the lawsuits.
Other wireless companies have also been stung by investigations into their stock option-award practices. Boston Communications Group Inc. is the subject of an informal inquiry according to a Wall Street Journal report, indicating that the prepaid wireless platform provider may have approved stock-option grants to senior executives three times during a five-year span at the lowest possible price for the calendar year. Also under suspicion are Openwave Systems Inc., which said it had received a letter of informal inquiry from the SEC, and Comverse Technology Inc., which has been shaken by an investigation.
Comverse is the subject of a criminal investigation by the U.S. Attorney’s Office, and the company announced a front-office shuffling earlier this month that saw founder and Chief Executive Officer Kobi Alexander step down.
Nonetheless, Wall Street took AMT’s news in stride, as shares of the company’s stock were trading down just 57 cents at $30.97 per share during morning trading.
