First American: $35.7 Million in Backdated Stock Options
The First American Corporation announced today that its audit of historical stock option granting practices and related tax and accounting matters is complete, finding mispriced and backdated stock options at the company totaling $35.7 million from grants made between 1996 and 2006. On Nov. 2, 2006, the company disclosed that an internal subcommittee had reached a preliminary conclusion that actual measurement dates of certain stock option grants differed from the recorded dates of such grants, and that the company expected to record additional non-cash charges for stock-based compensation expense. Although the company said it believes that the cumulative impact on the company's shareholders' equity at the end of 2005 is negligible, the cumulative amount would be material to the 2006 fiscal year if corrected in current financial statements. First American has said it instead will restate its financial results for the years 2001 through 2005, each quarter in 2005 and the first quarter of 2006. First American also said it will catch up on delayed 10-Q filings with the SEC for the second and third quarter of 2006 by the middle of next week. According to a statement released this morning by First American, the special subcommittee that lead the four-month internal review of stock granting practices determined that errors at the company were the result of date selection methods, internal control deficiencies and the misapplication of technical accounting provisions. Errors were not due to fraud, self-interest on the part of management or members of the Board of Directors or intent to misstate the company's financial statements, company officials said. First American noted that its option granting practices have been led to a recent SEC inquiry for fact on the matter, and said it is cooperating fully with the inquiry request.