George AllenGÇÖs explanation that his failure to disclose stock options was unimportant because the options were worthless has been poked full of holes by a Bloomberg news story.
http://www.bloomberg... The Bloomberg analysis says the options were worth up to $1.1 million. Further complicating AllenGÇÖs public defense, Bloomberg reports: GÇ£In the Senate, Allen opposed an accounting rule change that requires companies to list options as an expense on their financial reports. Allen co-sponsored a measure to block the rule change and in a hearing that year linked the awarding of stock options to increasing the security of U.S. troops in Iraq.GÇ¥ In other words, issuance of stock options would be harder for shareholders and the public to detect GÇô making it impossible to analyze conflict of interest problems for non-disclosing public officials like Allen. Bloomberg is a leading financial analysis company.
Allen's Undisclosed Stock Options Were Worth Up to $1.1 Million
By Michael Forsythe and Miles WeissOct. 10 (Bloomberg) -- Stock options that Senator George Allen described as worthless were worth as much as $1.1 million at one point, according to a review of Senate disclosure forms and U.S. Securities and Exchange Commission filings.
The records appear to contradict remarks he made to the Associated Press. ``I got paid in stock options which were worthless,'' AP quoted him as saying.
Allen served as a board member of Chantilly, Virginia-based Xybernaut Corp. from 1998 until December 2000 and was awarded options on 110,000 shares during that period. His Senate financial disclosure form for 1999, required for candidates as well as officeholders, doesn't report that he owned the options.
The stock options issue didn't arise during a televised debate last night between Allen, a 54-year-old Republican, and Democratic nominee Jim Webb, 60. Nevertheless, Mark Rozell, a professor of public policy at George Mason University in Arlington, Virginia, said the issue poses a problem for Allen, who polls show is in a close race with Webb.
``In an election season in which congressional ethics and morality are at the top of public discussion, Allen may now be seen by much of the public as part of a larger problem afflicting his party,'' Rozell said.
Allen left Xybernaut at the end of 2000 after he was elected to the Senate. The company makes portable computers that can be strapped to the body for military or civilian uses.
SEC records showed that Allen owned 60,000 options at the end of 1999, worth $38,200. For 2000 and 2001, he filed amendments to his annual disclosures stating that he owned Xybernaut options.
60,000 Options
In March 2000, Allen held 60,000 options when Xybernaut shares closed at an all-time high of $23.75. That would have made the options worth $1.1 million, less commissions and fees, had Allen exercised them.
At that time, Allen could have paid $5.47 and $1.56 respectively for two groups of options, sold them and pocketed the difference. He was awarded another 50,000 options in October 2000.
Greg Walden, an attorney at Patton Boggs LLP in Washington who represents Allen, said the options with Xybernaut expired 90 days after Allen left the board in December 2000.
Walden said Allen never exercised the options. They became worthless as the share price fell. The company went bankrupt in 2005.
A filing by Allen, which Xybernaut forwarded to the SEC in February 2001, shows that he had the right to exercise all the options at the end of 2000. The options were to begin to expire in 2008. Allen also reported owning the options on his 2002 and 2003 Senate financial disclosures, long after Walden said they had expired.
Chief Executive
Xybernaut Chief Executive Perry Nolen referred reporters to Allen's Senate office. ``I've helped them by providing information to them. So it should be accurate,'' Nolen said.
The company, which now has a market capitalization of less than $1 million, raised $173 million from investors since first going public 10 years ago. It never had a profitable quarter.
By the end of 2000, Xybernaut's share price had plummeted to $1.69, and Allen's options were worth just $1,300.
In 2001, Allen's first year in the U.S. Senate, the company's share price recovered to $5.46 on May 25, which would have valued 110,000 options at $71,500 before commissions and other brokerage fees. Some of the options exceeded their strike price as recently as July 2004.
Allen wrote a letter to the U.S. Army on Xybernaut's behalf in December 2001, AP reported, citing John Reid, Allen's spokesman, who told AP he wouldn't disclose the contents of the letter. In September 2003 the U.S. Defense Department announced $2.13 million in contracts to buy the company's wearable computers.
The Bloomberg analysis also pointed out another potential public relations problem for Allen -- Allen co-sponsored legislation that would have abetted his non-disclosure. Clearly this is another issue for the media to examine in finer detail
Accounting Rule Change
In the Senate, Allen opposed an accounting rule change that requires companies to list options as an expense on their financial reports. Allen co-sponsored a measure to block the rule change and in a hearing that year linked the awarding of stock options to increasing the security of U.S. troops in Iraq.
He said stock options make investments in technology companies more attractive, leading to innovations that helped make ``it safer for our men and women in uniform.''
Allen's double-digit lead in the race was eroded following a comment he made about one of Webb's Indian-American campaign workers and media reports alleging he made racial slurs against blacks while a student at the University of Virginia in the 1970s. He has denied making racial slurs.
A. He (or his financial advisor) blundered by not exercising the options, and lost a million dollars.
B. He made a judgment that Xybernaut was going to take off and decided to hold the options. But it didn't work out, notwithstanding his efforts to help the company later.
C. He feared that exercising the options would raise questions that would be damaging politically.
D. All of the above.
A stock option is always worth something, until it expires.A stock option represents the right to buy stock at a set price, within a period of time. *** under the tax code, in order to get favorable tax treatment, the exercise price must be above the fair value at the time of issuance.
The value of a stock option is the right to wait and see whether the stock goes up. If it does, then it can be exercised at a profit. If not, it is allowed to expire. The value of an option resides in the chance of such an increase in value.
If the options were really worthless, why would the company waste its time issuing them?
Either Allen is an idiot, or he is deliberatley lying ot us. Well, okay, there is a third possibility. Maybe he was ignorant when he received the options and now understands and is lying.
I hope they put this into radio spots, robo calls and maybe a TV ad...
this is really damning frankly and is another element showing how Allen is dishonest.
Allen is being dishonest to the conservatives in the state too...from taxes to budget deficits and I hope they are finally shaking out of the denial that the Democratic party is now the home to real fiscal and foreign policy conservatives and their party has been taken over by corruption, corporations, special interests and insane NeoCon agendas.