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As the options backdating investigation has multiplied, it’s slowly started to ensnare more than the usual suspects, the tech companies. The tech companies were the easy targets because … that’s where the options are. If you can’t find something wrong with options transactions in a sample that large, then there’s nothing wrong.

It’s like Willie Sutton’s famous line about banks: he robbed ‘em because that’s where the money was. The work we’ve done on the S&P 500 shows that the tech sector accounted for about 45% of all S&P 500 options issued in 2005 - even though options’ popularity has declined dramatically since 2001. (Firms issued over twice as many options in those days.)

Evidently, the SEC and the US Attorney General found the examples in the tech sector because they kept finding more companies in the tech sector worth investigating. Check out the list at the Wall Street Journal Online (sub. required): most of them have been in the tech sector and the health care/medical sector.

But the investigations are fanning out a bit, to some more mundane sectors that you don’t immediately associate with gobs of stock options. Monday, it was learned that Monster Worldwide (MNST) was served with a subpoena by the US Attorney General, requesting information about its options program. Michaels Stores (MIK), while not under investigation by the SEC or the US Attorney General announced their own self-appraisal of options transactions while informing the SEC of their review. (Good idea, because they’re filing their April quarter 10-Q late because of the exam.) Military contractor DRS Technologies (DRS) has been called as a witness in an investigation by the US Attorney General, in connection with options granted at a company it acquired.

The expansion of the industry scope makes a lot of sense from an investigation standpoint: if you’re gathering evidence for developing a policy or standard, something that would sweep lots of companies into a restatement mode, it’s smart to see what a wide range of companies have been doing. You’d hope the SEC comes up with something sooner rather than later: it seems like these announcements come in clusters, and they generate fresh round of finger-pointing each time. It would greatly benefit the markets to get the issue cleared up globally once and for all, so they could focus on the economics of firms in the marketplace - as well as ousting the miscreants who pushed for these paydays with some certain facts.

Source: Options Backdating Moves Beyond the Usual Suspects (DRS, MIK, MNST)