Home Depot details options error

ATLANTA -- The Home Depot Inc. said yesterday an internal investigation of stock option practices has concluded that errors caused it to have roughly $200 million in unrecorded option expenses over a 26-year period.

Despite the errors, the review, conducted with the help of outside counsel, determined that there was no intentional wrongdoing by any current member of the company's management team or its board of directors.

Home Depot, the nation's largest home improvement store chain, did not make an assertion about the integrity of actions of prior management. However, it said that for many years management personnel who have since left Home Depot generally followed a practice of reviewing closing prices for a prior period and selecting a date with a low stock price to increase the value of the options being granted to certain employees that were subsequently approved by the board.

The practice, known as backdating, has resulted in reviews at a number of big corporations.

The unrecorded stock option expense at Home Depot covers the period from 1981 to the present, and it excludes related tax consequences.

The review also found that in numerous instances, and primarily prior to 2003, beneficiaries of grants who were required to report them to the Securities and Exchange Commission failed to do so in a timely manner or at all. Also, numerous option grants to rank-and-file employees were made "pursuant to delegations of authority that may not have been effective" under the laws of Delaware, where Home Depot is incorporated. A Home Depot spokesman refused to explain what that means, but St. John's University business professor Anthony Sabino said it suggests whoever was authorizing options might not have been the best person to do so.