Read The Recorder‘s roundup of the stock-option backdating scandal. There won’t be a test later … but there might be a subpoena.
Defining a fair termination and figuring how much money disgraced executives deserve are usually at the heart of the disputes. “The challenge, in some of these cases, has been looking at what contractual or other remedies or other relief might be available to an employer,” he said.
While companies normally face quick assaults from angry ex-employees, Dolan said those caught up in the backdating scandal are playing a waiting game. Former executives might not want to be put under oath in an employment case when they still face criminal charges, he said.
“When it comes to getting a couple of hundred thousand dollars or even a million dollars, those stakes pale in comparison with a threat to your personal freedom,” Dolan said.
Dolan expects to see more employment disputes as the backdating drama continues to unfold, especially between companies and lower-ranking officials who believe they may have been wrongfully scape-goated and fired over the situation.
YOU’LL PAY FOR THIS …
With companies shelling out lots of cash for all those lawyers, disputes over who pays the bills � insurers or policy holders � has brought work to insurance attorneys.
Heller Ehrman’s 60-lawyer insurance group has handled about 10 claims for companies looking to make their insurers pay up, said David Goodwin, a longtime Heller partner. It’s just a small percentage of the firm’s insurance work overall, but it’s brand-new for the lawyers.
“It has been an area that appeared in the last couple of years and has had some interesting issues,” Goodwin said. (He declined to name the clients.)
None of Heller’s clients’ claims have ended up in litigation, though some have ended up in mediation, he said. The disagreement is normally over executives who received ill-gotten gains.
“The typical dispute revolves around exclusions in standard insurance policies for either compensation or for receiving of money to which a party is not entitled,” he said.
Goodwin said he expects the claims to grow over the coming year but to fall off after that since companies ought to have learned their lesson. Before it all dries up, he expects at least a few showdowns over big insurance claims.
While all types of lawyers swarmed over the stock option mess once it exploded, some remember it in its infancy.
P. Garth Gartrell, an executive compensation lawyer with Greenberg Traurig, said he counseled his first client on backdating in 2005, though he declined to name them. At first, he said it was only lawyers like him on the scene. “When you’re trying to get your arms around whether you have an issue, at a certain point all the different disciplines of what we do in the executive compensation field come into play,” he said.
Back then, he continued, the thought of even getting a securities litigator involved was a novel idea.
“I thought getting litigators involved was an outlier,” Gartrell said, laughing. “I cer-tainly wouldn’t have turned to a litigator three years ago to ask them about backdating.”
