Biomet finds options errors; CFO resigns

Biomet finds options errors; CFO resigns

	Published : Sat, 31 Mar 2007 00:47 By : Agencies Print this Story

WARSAW, Ind. (AP) - Biomet Inc. said Friday its chief financial officer and another executive resigned after an internal inquiry found accounting errors related to stock option grants over the past 11 years.

The company said it will have to restate its most recent annual report to reflect the disparity in the recorded expenses for stock option grants and the actual expenses for the grants, which totals about $50 million over 11 years, according to preliminary findings.

Chief Financial Officer Gregory Hartman and Executive Vice President of Administration Daniel Hann resigned but were retained as consultants 'to ensure a smooth transition of business operations,' according to Biomet. Hartman also resigned as senior vice president of finance and treasurer. Hann also resigned as a director.

The company named J. Pat Richardson as the vice president of finance and tapped him as interim treasurer and chief financial officer.

Biomet said the inquiry covered 17,000 grants to purchase approximately 17 million shares on over 500 different grant dates over the 11-year period from 1996 through 2006.

It found, in part, that 'most of the options issued during the 11-year period from 1996 through 2006 were not priced at the fair market value on the date of their respective grants.'

Backdating, as the practice is known, is not necessarily illegal but must be properly accounted for and disclosed to investors. It refers to changing the vesting date on stock options to make them more valuable for the holder.

The $50 million charge, expected to be non-cash, represents the difference in expenses the company should have booked, it said. Biomet plans to restate its financial reports for the fiscal year ended May 30, 2006, and the fiscal quarter ended Aug. 31, 2006, to reflect that charge.

Biomet said 'the company's chief financial officer and general counsel during the period, were or should have been aware of certain accounting and legal ramifications, respectively, of issuing an option with an exercise price lower than the fair market value on the date of issuance.'

More than 200 companies have disclosed Securities and Exchange Commission, Department of Justice or internal investigations, according to an Associated Press review related to backdating stock options.

Shares of Biomet were unchanged to close at $42.49 on the Nasdaq Stock Market.