Friday, September 22, 2006

Coming Soon to a Movie Theater Near You! “The Undead…at Least for Options Purposes”

Cablevision Gave Backdated Grant To Dead Official
—Wall Street Journal

That’s the headline, and I am not making it up.

According to the article in today's Journal,

Cablevision Systems Corp. awarded options to a vice chairman after his 1999 death but backdated them, making it appear the grant was awarded when he still was alive, according to a company filing and people familiar with the matter.

The funny thing is that just the other day, while discussing the recent firing of Bristol Myers’ bad-news-plagued CEO Peter Dolan, a hedge fund friend said, “Maybe the lesson here is never invest in a company whose CEO is named ‘Dolan.’”

The other, non-Bristol Myers ‘Dolan’ my friend had in mind was James L. Dolan, the CEO and President of Cablevision—the “Dead Official” option-granting company of the above headline, which happens to run one of the better cable franchises around. Dolan is also, unfortunately, the Chairman of Madison Square Garden, home to what has to be one of the worst sports franchises around—the formerly storied New York Knicks.

It is in his capacity as boss of MSG that James Dolan—“Jimmy” to his friends among Wall Street’s finest—gets to sit at court-side and watch up-close what used to be a team that won championships implode under whatever new staff he assembled during the off-season to replace the previous season’s fodder for the New York Post.

(Not that I care much for basketball, the object of which is, as far as I can grasp it, to run out the clock by fouling opposing players the nanosecond the ball is put in play, thus causing the final “three minutes” of the game to stretch out so long that players can be traded to other teams and back again before the final “three minutes” is over.)

Any doubts that Cablevision—long accorded a discounted valuation on Wall Street for the perception of being run by and largely for the Dolan friends and family—could have benefitted from the kind of outside, Federally-appointed overseer that played a key part in ousting Peter Dolan after multiple billion-dollar-type mis-steps at Bristol Myers should be erased by yesterday’s SEC filing from Cablevision, as well as today’s Wall Street Journal story.

Cablevision backdated options from 1997 to 2002, according to its SEC filing. In practically all cases the share prices were lower, "sometimes substantially lower," on the option awards than they were on the actual date options were granted, the filing said.

But here’s the whopper:

"The company's board of directors and senior management believe that the practices...are contrary to the high ethical standards they believe should apply," the filing stated.

What makes that amusing, of course, is that “Jimmy” was CEO of the company during the entire five-year stretch of ethical-standards-contrary backdated options.

Wonder if any of the Cablevision “friends and family” have been granted options that date back to before they were born?

Now that would be something.

Jeff Matthews
I Am Not Making This Up

© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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