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Family Dollar Stores Inc.

Washington, DC: (Jun-22-07) A stockholder derivative lawsuit was filed against discount store chain Family Dollar Stores Inc., accusing the company of backdating stock options. Family Dollar was one of more than 100 companies which launched internal reviews into their stock options practices. The probes centered on backdating, which occurs when a stock option's exercise price is set at a point lower than the prevailing market price, which can inflate the recipient's award. While the manipulation itself isn't necessarily illegal, securities laws require companies properly disclose the practice in their accounting and settle any resulting charges.

In a settlement reached, a number of company executives, including its chief executive and president, will relinquish an aggregate of 210,000 stock options. The company agreed to put in place a variety of corporate governance reforms, which will check future breaches. Family Dollar said that while there has been no finding of wrongdoing related to the grant of the options, it has determined that the settlement was in the best interest of the company. The lawsuit has said to have cost the company about $5.7 million, which will be reflected in the third quarter of fiscal 2007 for previously unplanned costs and expenses related to the lawsuits and settlement, including $3.5 million in attorneys' fees to the plaintiffs' counsel. [FORBES: BACK DATED STOCKS]

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Published on Jun-26-07


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