Saturday, July 22, 2006

Wilson Sonsini and options backdating scandal

Mukund Mohan caught the news that Bay Area dot.bomb champion law firm Wilson Sonsini Goodrich and Rosati appears to have been intimately involved with nearly half of the companies now twisting in the wind over the stock options backdating scandal. Indeed, Larry Sonsini himself appears to have worked with Brocade Communications ex-CEO Gregory Reyes in setting up the Brocade board mechanisms that allowed him to issue stock options at will. (Normally this would be a job for the board compensation committee, which these days typically has to be made up of only independent board members--but since Brocade's compensation committee met only once every three months, and Brocade was a growing company looking for the best and the brightest, maybe Mr. Sonsini figured it might be best if the CEO could just do this on his own. Executive decisions and all that...)

At any rate, my question is whether the SEC will use it's new post-Sarbanes-Oxley Act powers (specifically the SEC rules made pursuant to Section 307) to look into Wilson Sonsini's activities. But given how easily Vinson & Elkins skated free of its association with all those Enron transactions (you know, the ones involving Star Wars characters and the hiding of billions of dollars of debt?), I'm not holding my breath.

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