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Sanmina Exec Resigns in Option Scandal

The Associated Press
Thursday, October 12, 2006; 5:53 PM

SAN FRANCISCO -- Sanmina-SCI Corp. has severed ties with an executive who helped manipulate the value of employee stock options in a nearly decade-long scheme now under investigation by a federal grand jury.

The developments announced Thursday by the San Jose-based electronic parts manufacturer are the latest fallout from a scandal dogging dozens of companies that mishandled their stock options.

The chicanery drew the attention of federal regulators and prosecutors earlier this year, prompting more than 100 companies to launch internal reviews to ensure they accounted for their options properly. A large chunk of those companies are in Silicon Valley, where stock options first became staples of employee compensation packages.

Most of the inquiries are focused on a technique known as "backdating," which occurs when insiders look back in time for a low point in their company's stock price so the exercise, or "strike," price of the options could be set at that ebb.

If they aren't properly disclosed, backdated options can inflate corporate profits and result in an underpayment of taxes.

As they wrap up their investigations, many companies like Sanmina-SCI are contritely acknowledging their misconduct and dumping the responsible executives.

Sanmina spokeswoman Paige Bombino declined to identify the executive who resigned because of the stock option shenanigans, saying only that it wasn't the company's chief executive officer or chief financial officer.

Another executive who had previously left Sanmina also helped engineer a scheme affecting stock options dating back to 1997, according to the company.

At least 27 other senior executives and directors have either resigned or been fired by companies entangled in a stock option imbroglio that's erasing previously reported profits and spurring government investigations.

On Thursday, Sanmina revealed that it had received a subpoena from a federal grand jury in San Francisco, where a task force assembled by the U.S. Justice Department is marshaling criminal investigations into the stock option scandal. The company didn't specify what kind of information is being sought by the grand jury.

The stock option trouble already has imperiled Sanmina's listing on the Nasdaq Stock Market because the company missed an August deadline to file its last quarterly report with the Securities and Exchange Commission. Sanmina, like several other companies entangled in the scandal, is still trying to quantify the financial impact of its improper stock option accounting.

Sanmina shares closed unchanged Thursday at $3.93 on the Nasdaq Stock Market.

© 2006 The Associated Press