Spitzer Looks Into Executives' Stock OptionsJul 31, 2002 | FT.Com
Eliot Spitzer, the New York state attorney general, is investigating the legality of stock options and other compensation awarded to CEOs of bankrupt companies.
Mr Spitzer, who has campaigned against conflicts of interest in Wall Street investment banks, was responding to disclosures in the Financial Times that top executives and directors in the biggest US business collapses amassed several billion dollars in salary and share sales.
He said that his investigation could lead to attempts to recover assets from individual executives. Mr Spitzer said the the FT's findings were "amazing . . . The outrage at these guys is legitimate."
The executives who reaped the biggest rewards before their companies went bankrupt include Gary Winnick of Global Crossing ($512m or Â£327.7m), Ken Lay of Enron ($247m) and Scott Sullivan of WorldCom ($49m).
Mr Spitzer would not identify individuals or companies under scrutiny but said several were among the 25 top bankruptcies on the FT list.
The FT survey covers salary and share sales between January 1999 and December 2001. US stock prices peaked in March 2000.
Earlier this year Mr Spitzer reached an agreement with Merrill Lynch under which the US investment bank will pay $100m to resolve conflict of interest claims against its equity analysts. He released e-mails which suggested Merrill's internet analysts publicly recommended stocks they privately disparaged in the hope. of winning deals.
He said his officials were looking at other areas of potential criminality and malfeasance. He said the FT survey "falls within the ambit which we have been pursuing, that is the degree to which stock options and executive packages given to CEOs were either illegal or improper".
In Chicago, Ellen Hancock, former chief executive of web hosting operation Exodus, defended her $15m of share sales and stewardship of the company, which collapsed in 2001. While Ms Hancock amassed significant sums, she made less than several Exodus directors and other executives.
The records show Exodus insiders made more than $350m from share sales.
Ms Hancock admitted to "mixed emotions about whether I should have sold more, but at the time I was very sensitive to the fact I was chief executive of the company and I should follow a process [of selling] in a consistent fashion . . . I did reasonably limit what I removed from the company while trying not to be totally irresponsible to my own position."