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May 24, 2006 9:36 pm

Probe generates rush of subpoenas

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The widening scandal over the timing of executive stock options snagged another victim on Wednesday as Analog Devices, a Massachusetts-based maker of integrated circuits, said it had been subpoenaed for documents relating to its granting of stock options.

Several companies are undergoing Securities and Exchange Commission probes regarding their option-granting practices or have received subpoenas from the US Attorney's office.

While scrutiny was sparked by signs that companies may have back-dated the granting of options, concern revolves around whether such back-dating was properly disclosed to shareholders and accounted for.

Such concern has started to prompt lawsuits from shareholders, with UnitedHealth Group hit with a suit on Tuesday from two Ohio public pension funds.

The suit alleges there was no disclosure to shareholders of the compensation plan of William McGuire, chief executive, that they say involved handing him control over the granting of options dates.

Mark Lindsay, UnitedHealth’s spokesman, said: “It’s our policy not to comment on proposed or ongoing litigation.”

The company recently launched its own board-level review of stock options policy.

Mr McGuire was not available for comment.

Bruce Vanyo, co-chair of the securities litigation group at Katten Muchin Rosenman, said: “There would be nothing wrong with an officer [of the company] watching the stock dip to a low, calling the compensation committee and saying ‘now would be a good time to grant me an option’ - as long as the option plan permitted that.”

“That’s not what people are asserting took place. They are saying that after the stock had reached a low and, with hindsight, a decision was made to grant options, as of some past date, so that someone immediately made a profit – and there was no disclosure or proper expensing of it,” Mr Vanyo said.

Christopher Cox, SEC chairman, said on Tuesday that the settlement of accounting fraud charges against US mortgage group Fannie Mae should “send a clear message to others” that “fraudulent financial reporting cheats investors of their savings”.

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