Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):
In Sycamore Suit, Memo Points To Backdating Claims
Summary: An ex-employee of optical networking company Sycamore Networks has revealed the existance of a memo discussing a promise made to six new employees to grant them stock options at the lowest price of the quarter and to mis-record their start dates to maximise the value of their options, and evaluating risks the manipulation would be discovered by the company's auditors. The memo is the clearest evidence yet that a company understood the illegality of its manipulation of stock options. The memo has surfaced as part of a lawsuit brought be Sycamore's ex-director of human resources, who claims he was unfairly dismissed because he refused an order from then-CFO Frances Jewels to manipulate options and was then fired.
Comment on related stocks/ETFs: Ms. Jewels was replaced as CFO in October 2004, but that doesn't matter: this is a clear case of another company caught in the options trap. Don't own Sycamore's stock (NASDAQ:SCMR) until this is cleared up. And even then, beware of the excess hype in the optical space. The only thing that makes this stock attactive is the fact that it has over $850 million in cash on its balance sheet, and a market cap of about $1.1 billion. But who wants to own a corporate money market fund?