Submitted by selva ozelli, Feb 27, 2007 12:39

I read your editorial titled "Thompson's Trial Lawyers" today, which starts with pointing out to an undisclosed campaign contribution made to William Thompson Jr. by trial attorneys --Grant & Eisenhofer-- who were hired by the city's pension plan to pursue a shareholder lawsuit against Apple Computer for options backdating, and ends with questioning the merits of city pension plan's litigation against Apple for stock option backdating by stating: "It's one thing, however, to take campaign money from trial lawyers. It's another thing entirely to turn around and allow those lawyers to use the good name of the city pension fund to pursue litigation with no redeeming value other than racking up huge fees for those same trial lawyers". The author of this editorial might be unaware of the two recent Delaware law decisions (In re Tyson Foods, Inc. Consol. S'holder Litig., C.A. No. 1106-N (Del. Ch. Feb. 6, 2007), 2007 WL 416132 & Ryan v. Gifford, C.A. No. 2213-N (Del. Ch. Feb. 6, 2007), 2007 WL 416162) published on February 6, 2007 , that indicate that a director may be deemed to have breached his or her duty of loyalty by acting deceptively and in bad faith (and therefore outside the protections of the business judgment rule and personal liability limitations in the charters of most public companies) by authorizing the granting of options priced at a time when the director knows those options will be quickly worth more upon the subsequent release of material, nonpublic information. These decisions futher state that intentional backdating -- where directors intentionally violate a stockholder-approved option plan and the company makes fraudulent disclosures regarding the directors' purported compliance with such plan in SEC filings or other public disclosures-- is one of those "rare cases in which a transaction may be so egregious on its face that board approval cannot meet the test of business judgment, and a substantial likelihood of director liability therefore exists." In such circumstances, directors may lose the indemnification and other liability protections afforded by the Delaware General Corporation Law and may be personally liable for resulting damages to the company. In light of these recent decisions, my question to the author of this editorial is: In your opinion is city pension plan's shareholder litigation against Apple and all other 200 companies implicated with stock option backdating without merit when shareholder litigation seems to be the only means for shareholders to question a director's integrity?

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