Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Amid the growing pile of derivative lawsuits stemming from the stock option backdating scandal, the latest complaint filed Wednesday against Novell Inc. takes particular aim not just at grants to executives, but to board members as well. The complaint focuses on options Novell board members gave themselves in October 1999, which came in addition to their regularly scheduled options. The “strike price” of the grants was a 17-month low. Filed by San Diego’s Lerach Coughlin Stoia Geller Rudman & Robbins, the suit also accuses the current top managers and board of directors and former CEO and chief financial officer of fraudulent accounting from 1999 to 2006. The alleged backdating “has wreaked hundreds of millions of dollars of damages on Novell,” according to the suit. Novell spokesman Bruce Lowry said the company doesn’t comment on ongoing litigation. The derivative suit was the third to be filed against the Waltham, Mass., company in federal court since Novell announced in August it had launched a voluntary, outside review of its stock-option practices. That investigation, conducted by Morgan, Lewis & Bockius, continues. Unlike several other companies facing questions about their stock-option accounting, Novell has not said it is under government investigation. In June, Novell’s chief executive, Jack Messman, and its chief financial officer, Joseph Tibbetts Jr., stepped down. Lowry said those management changes “were not related to the stock options investigation” that is currently under way. Neither Messman nor Tibbetts could be reached for comment Thursday. Tibbetts was hired Tuesday as CFO of the Cambridge, Mass.-based business consulting firm Sapient, a company whose CFO resigned because of stock-option problems. Last month, The Recorder reported that Larry Sonsini, chairman of Wilson Sonsini Goodrich & Rosati, was among the board members to receive the 50,000-share option in October 1999. He was not named in Wednesday’s suit, however. Sonsini left Novell’s board in 2002. At the time of the October 1999 option grants, the complaint claims, the company’s stock plan dictated that non-employee board members would automatically receive options on the date of the company’s annual meeting. And though a proxy statement stated the October 1999 grants were permitted under the company’s 1991 stock plan, the company’s stock plan was revised in 1996. That revision would not have allowed for such out-of-sequence grants, the complaint alleges. A Wilson Sonsini spokeswoman noted Sonsini never exercised his October 1999 grant.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at cust[email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.