FBI has 61 options backdating cases

By Jonathan Stempel

WASHINGTON (Reuters) - The stock options scandal has mushroomed to comprise one-eighth of the FBI's corporate fraud caseload, a senior agency official said on Wednesday.

Sixty-one of 492 pending cases involve alleged mispricing of options, such as backdating, according to James Burrus, a Federal Bureau of Investigation assistant director who heads the agency's criminal investigative division.

Speaking at the Reuters Regulation Summit in Washington, Burrus nevertheless said the crime-fighting agency may soon be devoting less attention to options.

This is largely because many cases involve wrongdoing that occurred prior to adoption of the Sarbanes-Oxley Act of 2002, designed to thwart corporate malfeasance.

"I see stock options for us as not a long-term problem," he said. "I don't see it as something that's going to be a problem in 2011 or 2012 like ... insider trading or false financial statements. These are the backbone of corporate fraud."

The options scandal has ensnared close to 200 companies, according to disclosures of internal investigations or probes by the Department of Justice, the Securities and Exchange Commission and the Internal Revenue Service.

Stock options let holders buy shares in the future at fixed prices. Backdating involves retroactive awards on days when share prices were low.

The SEC, which unlike the FBI has no criminal enforcement power, is examining more than 130 companies' grant practices, Chairman Christopher Cox told Reuters on Monday.

"You can expect a normal progression from investigative phase to the filing of public charges in a number of these cases," Cox said at the summit. "Through swift and aggressive action, we can put an end to this problem."

Burrus added: "We're doing pretty well with option cases ... They're not as hard to understand as some of the more complicated financial misrepresentation cases I've seen."

In a prominent case involving arrests and the FBI, three executives at software maker Comverse Technology Inc. CMVT.O have surrendered to the agency or been captured.

On Wednesday, former general counsel William Sorin, one of two to surrender to the agency, agreed to pay more than $3 million in an SEC civil settlement.

Former Comverse chief executive Jacob "Kobi" Alexander is in custody in Namibia as that government considers a U.S. extradition request.

"He's got to come back and face the music," Burrus added.