Friday, March 9, 2007
Add former Cirrus Logic, Inc. CEO David D. French to the lengthening list of chief executives fired over the timing of options grants, although the results of the internal investigation may portend considerable trouble for him with the government. Cirrus announced that it will have to take a $22-24 million hit from the improper options grants, which is a fairly small amount as these things go. More ominous is the description of French's involvement, contained in the company's 8-K (here):
o The Special Committee believes based on the evidence developed in the investigation that certain executive officers had knowledge of and participated in the selection of three grant dates for broad-based employee option grants in the 2000 through 2002 timeframe, either with hindsight or prior to completing the formal approval process.
o The executive officers involved in the option grant process prior to 2003, and in particular the grants described above in the 2000 through 2002 timeframe, are no longer with the Company with the exception of David D. French, the Company's President and Chief Executive Officer.
o The Special Committee believes that Mr. French was significantly involved in the grant approval process for certain grants and that he influenced the grant process with a view toward the stock price, and therefore the selection of grant dates, through his control over how quickly or slowly the process was completed. However, the Special Committee does not believe that Mr. French appreciated the significance of the procedural inadequacies or the accounting implications of the grant approval process or grant date selections, or that he was advised by his executive staff of any such inadequacies or implications.
A conclusion that a company's CEO was "significantly involved" in the approval process and "influenced" the price will draw the attention of investigators, regardless of the special committee's conclusion that French did not "appreciate the significance" of his actions. While it's not clear whether the Department of Justice has been investigating the Austin, Texas, company, they may well appear on the scene soon. (ph)