Fergie's Tech Blog

Verisign Receives Subpoena Relating to Stock Option Backdating

George Kirikos writes on CircleID:

VeriSign has reported that they are cooperating with a grand jury subpoena and a SEC inquiry into their historical stock option grants. More can be found here. Backdating of options is essentially a fraud against existing shareholders, as noted in the press or simply searching Google for “backdating fraud”.

Under the existing 2001 .com Registry Agreement, section 16.C would allow for termination of the agreement by ICANN in the event that VeriSign “is convicted by a court of competent jurisdiction of a felony or other serious offense related to financial activities, or is the subject of a determination by a court of competent jurisdiction that ICANN reasonably deems as the substantive equivalent of those offenses”, or “is disciplined by the government of its domicile for conduct involving dishonesty” or “Any officer or director of Registry Operator is convicted of a felony or of a misdemeanor related to financial activities, or is judged by a court to have committed fraud or breach of fiduciary duty, or is the subject of a judicial determination that ICANN deems as the substantive equivalent of any of these, and such officer or director is not immediately removed in such circumstances.”

The proposed New .com Agreement doesn’t appear to contain similar termination provisions. Short of bankruptcy, it’s nearly impossible for VeriSign to not have the .com agreement renewed perpetually, even if they are found to be fraudulent or dishonest.

posted by Fergie @ 6/27/2006 06:24:00 PM