Cablevision and 16 current and former executives agreed to settle an options-backdating lawsuit dating from 2006 for $34.4 million with a group of defendants.
Cablevision reported the settlement in a federal filing yesterday.
Out of the $34.4 million, insurance is expected to cover $10 million, while Cablevision executives, directors and a consultant will contribute the remaining amount. Most of the money will be returned to Cablevision, and none of the individuals who were being sued admitted to any wrongdoing.
Cablevision Chairman Charles Dolan will make a cash payment of $1 million, while his son, CEO James Dolan, will pay $366,250 to Cablevision for previously exercised options, as well as make a separate $1 million payment.
The estate of former Cablevision vice chairman, Marc Lustgarten, forfeited its claims to $4.9 million in stock options and restricted shares it was granted, including those he received after he died in 1999.
Robert Lemle, formerly a Cablevision general counsel, agreed to return $2.25 million to Cablevision, as well as relinquish options and related stock issues that amounted to $4.5 million.
Shareholders had focused their attention on the period between 1997-2002, during which time-backdated options and stock appreciation rights on more than 11 million shares were granted to Cablevision officers, directors and employees. The complaint alleged that grants were routinely priced below the company’s closing share price on the day they were issued, which was in violation of Cablevision’s employee stock option plan.
According to one of the law firms that represented the plaintiffs, the consistently below-market grants provided the various recipients a higher likelihood of profiting on their options.
In subsequent years, Cablevision’s public financial statements acknowledged that its option grants for the period did not correspond to the actual grant dates and closing of the company’s common stock, and that its options practices during those years were “contrary to the high ethical standards” that Cablevision management believed “should apply to all of the company’s business practices,” according to law firm Grant & Eisenhofer.
“This is an extremely satisfying outcome for investors, not only for the significant financial recovery it represents, but because individual defendants are contributing more than two-thirds of the value of the settlement,” said Stuart Grant, managing director of Grant & Eisenhofer. “Moreover, the company has agreed to upgrade its compensation processes to ensure that backdating will not recur in the future.”
The agreement also called for Cablevision to institute certain corporate governance reforms in its executive compensation packages.
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