MRV Comms Backtracks on Backdating Issues

MRV Communications (MRVC) shares are down sharply after the company this morning disclosed the discovery of stock-options backdating problems and other related accounting issues.

One reason this case is particularly troubling is that the company had previously said that a review of its options granting practices had found no evidence that grant dates were designed to occur on dates with lower prices. But the company says it now has evidence that the earlier review was incorrect with regards to certain options granted from 2002 through Q1 2004.

MRV said it discovered the issue while reviewing transactions related to two European subsidiaries, one in Switzerland and the other in Italy, but that the grants in question were not limited to those two units. For its Swiss subsidiary, Turnkey Communications, the issue relates to “accounting of earn-out formulae for certain employees.” For the Italian unit, EDSLan, the issue is “the accrual of expense for profit sharing arrangements with the former owners of the subsidiary who continued to management it after MRV’s incremental acquisition of the equity of EDSLan.”

MRV said its accounting review will “encompass a reconsideration and investigation of these transactions.”

MRV said it expects to restate results for the period from 2002 to 2008, and that previous financial statements should not be relied on.

Comments

[spenZer]

This can NOT be a major event financially- there is no effect on cash flow according to the release (not certain about taxes), but credibility is shot again and management should go! Time for new leadership.