In re cablevision systems corporation options backdating litigation tax treatment liquidating distribution foreign passive investment

At least in the absence of any other details about the settlement in any of the company’s disclosure document or even in the court filings to date, the amount of the plaintiffs’ attorneys’ fee seems, well, high.

For example, compare the million fee in the Marvell Technology settlement to the .116 million fee amount agreed to in the Cablevision case.

Even if the .5 million represents some benefit that accrued to the company as a result of the derivative lawsuit, the expenditure of million in fees to recover .5 million seems like a poor exchange.

However, the description of the settlement in the 10-Q does at least suggest some serious questions.The options backdating problems at Cablevision drew a great deal of attention when first disclosed.The company revealed that it had awarded options to a Vice Chairman after his 1999 death, but backdated the options to make it appear that the grant was awarded when he was still alive.However, there might well have been at least a colorable basis on which the Dolans might have been able to argue that their million dollar payments would be covered, assuming the typical D&O policy and assuming other potential policy provision did not otherwise preclude coverage.The language of Section 3.4 appears to represent a deliberate effort to ensure that the Dolans and the other defendants directly bore the cost of their settlement contributions.

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