The Securities and Exchange Commission began a formal investigation into Black Box Corp.'s stock options practices and has issued a subpoena for documents, according to a public filing on Friday.
One securities expert said the move from a previously informal inquiry is a "serious step."
Black Box is one of at least 220 companies nationwide that have disclosed internal or federal stock option investigations, and one of more than 130 that acknowledged they must restate financial results.
Black Box earlier this week stated in an SEC filing that it believed it would take a $70 million non-cash charge related to its options practices, up from a $63 million charge announced in March.
"Announcing a formal investigation and the subpoenaing of documents is another step in the investigation process, but it's also a serious step," said Gary Miller, a Philadelphia-based member of the law firm Eckert Seamans Cherin & Mellott, specializing in corporate securities. "It means the SEC staff is pretty confident there is something there."
A spokesman for Black Box, in Lawrence in Washington County, couldn't be reached for comment. The company's outside counsel was told about the formal investigation on May 25, but only acknowledged it yesterday in an SEC filing.
The SEC informally asked the technical services company for stock options-related documents six months ago. Black Box said its board's audit committee, along with outside counsel, were conducting an internal investigation, which is nearly complete.
"The company hoped that through the internal investigation and revealing those results, it could avoid this latest step," said Dale Hershey, a member in the Pittsburgh office of Eckert Seamans and associate professor of law at Carnegie Mellon University's Tepper School of Business.
"With this step, the SEC is saying it's not satisfied with the internal investigation, (that) 'We think there are things not revealed with an internal investigation, and we want to dig deeper,'" Hershey said.
Last week, Black Box disclosed in another SEC filing that Fred Young resigned after nine years as chief executive officer. Some industry watchers believe Young's exit was related to the stock options matter.
Miller and Hershey said there's no specific timetable for a formal SEC investigation, but Hershey said the examination would take months.
Nationwide, more than 90 executives and board directors have resigned, retired or been fired in moves related to options practices. The practice has triggered more than $12 billion in restatements, revisions and charges.
Earlier this week, the SEC announced that two Silicon Valley companies, Brocade Communications Systems Inc. and Hewlett-Packard Co.'s Mercury Interactive unit, were fined a total of $35 million for alleged manipulation of stock options.
This marked the first time the SEC has fined companies. Previously, penalties only were imposed against individuals.
Black Box's stock yesterday closed down 16 cents at $36.27.
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