CNET Networks Special Committee Reports Findings and Recommendations of Stock Options Investigation
October 11 2006 - 9:00AM
Business Wire
CNET Networks, Inc. (Nasdaq:CNET) (www.cnetnetworks.com) today
announced that a special committee of its board of directors (the
�Special Committee�) has reported its findings on the Company�s
options granting practices and procedures to the Board of
Directors. As previously announced, on May 22, 2006 the Special
Committee was established by CNET Networks� Board of Directors to
conduct an independent investigation relating to past option
grants, the timing of such grants and related accounting matters.
The Special Committee consists of two independent members of CNET
Networks� audit committee of the Board of Directors -- Peter Currie
and Betsey Nelson, chair of the audit committee. The Special
Committee was assisted in the investigation by outside legal
counsel Davis Polk & Wardwell and accountants from Navigant
LLC. The Special Committee reviewed and analyzed more than 700,000
documents and emails, and conducted over thirty interviews of
current and former officers, directors, employees and advisors to
CNET Networks over the last four months. As previously announced,
the Special Committee and the Company continue to cooperate with
the Securities and Exchange Commission, the NASD and the United
States Attorney�s Office for the Northern District of California.
�The completion of the Special Committee report represents an
important step forward for CNET Networks,� said Neil Ashe, the
Company�s newly elected chief executive officer. �We are committed
to ensuring that the highest standards of business conduct,
financial reporting and internal controls are maintained, and we
are focused on quickly implementing the recommendations of the
Special Committee. Under the leadership of our CFO, George
Mazzotta, we look to complete the restatement of historical
financial statements related to past stock option grants as soon as
practicable.� Key findings of the Special Committee�s report
include: There were deficiencies with the process by which options
were granted at CNET, including in some instances the backdating of
option grants, during the period from the Company�s IPO in 1996
through at least 2003. These deficiencies resulted in accounting
errors, which the Company has previously announced will result in a
restatement. A number of executives of the Company, including the
former CFO and the recently resigned CEO, General Counsel and SVP
of Human Resources, bear varying degrees of responsibility for
these deficiencies. The report does not conclude that any current
employees of the Company or any recently resigned employees engaged
in intentional wrongdoing. Since 2003, the Company has taken steps
to remedy these deficiencies through personnel changes and improved
internal controls. The Special Committee recommended a number of
additional remedial measures. The recently resigned executives and
the directors who received improperly priced options have agreed
voluntarily to have these options repriced to fair market value on
the appropriate measurement date. The Special Committee reported
that it believes that the Compensation Committee relied upon
management to establish and maintain appropriate procedures with
respect to stock option grants. The report stated that it would
have been better practice if the Compensation Committee had
encouraged management to adopt more rigorous procedures and
controls during the 1996-2003 period. In a separate press release
also issued today, the Company also announced that Shelby Bonnie,
CNET�s co-founder and the company�s chairman of the board and chief
executive officer from 2000 to the present, has resigned as
chairman and CEO. He will remain a director. The Company�s general
counsel and head of Human Resources have also resigned. With regard
to Mr. Bonnie, Mr. Jarl Mohn, chairman of the Board of Directors,
commented, �We extend our appreciation to Shelby for his founding
role and many years of service, and for his willingness to work
with the Board and the Company in assisting with this transition.
Shelby�s lasting legacy will be the innumerable positive actions he
undertook to make CNET Networks the successful industry leader it
is today." �I apologize for the option-related problems that
happened under my leadership,� said Shelby Bonnie. �I believe that
the company has come a long way since 2003 in addressing these
deficiencies, but am deeply disappointed it happened nonetheless.�
The Company and its independent auditors are reviewing the findings
of the Special Committee investigation. Management continues to
expect that CNET Networks will need to restate its historical
financial statements to record non-cash charges for compensation
expense relating to past stock option grants. The Company and its
independent auditors are reviewing recent accounting guidance
published by the SEC, and have not yet determined the amount of
such charges, the resulting tax and accounting impact, or which
periods may require restatement. (The Company issued a separate
release today announcing Neil Ashe�s appointment as CEO. In
addition, the Company also issued a press release today announcing
that it has modified and extended its solicitation of consents from
holders of its 0.75% Senior Convertible Notes due 2024 and updated
its third quarter and full year guidance.) About CNET Networks,
Inc. CNET Networks, Inc. (Nasdaq: CNET, www.cnetnetworks.com) is an
interactive media company that builds brands for people and the
things they are passionate about, such as gaming, music,
entertainment, technology, business, food, and parenting. The
Company�s leading brands include CNET, GameSpot, TV.com, MP3.com,
Webshots, CHOW, ZDNet and TechRepublic. Founded in 1993, CNET
Networks has a strong presence in the US, Asia and Europe. CNET
Networks, Inc. (Nasdaq:CNET) (www.cnetnetworks.com) today announced
that a special committee of its board of directors (the "Special
Committee") has reported its findings on the Company's options
granting practices and procedures to the Board of Directors. As
previously announced, on May 22, 2006 the Special Committee was
established by CNET Networks' Board of Directors to conduct an
independent investigation relating to past option grants, the
timing of such grants and related accounting matters. The Special
Committee consists of two independent members of CNET Networks'
audit committee of the Board of Directors -- Peter Currie and
Betsey Nelson, chair of the audit committee. The Special Committee
was assisted in the investigation by outside legal counsel Davis
Polk & Wardwell and accountants from Navigant LLC. The Special
Committee reviewed and analyzed more than 700,000 documents and
emails, and conducted over thirty interviews of current and former
officers, directors, employees and advisors to CNET Networks over
the last four months. As previously announced, the Special
Committee and the Company continue to cooperate with the Securities
and Exchange Commission, the NASD and the United States Attorney's
Office for the Northern District of California. "The completion of
the Special Committee report represents an important step forward
for CNET Networks," said Neil Ashe, the Company's newly elected
chief executive officer. "We are committed to ensuring that the
highest standards of business conduct, financial reporting and
internal controls are maintained, and we are focused on quickly
implementing the recommendations of the Special Committee. Under
the leadership of our CFO, George Mazzotta, we look to complete the
restatement of historical financial statements related to past
stock option grants as soon as practicable." Key findings of the
Special Committee's report include: -- There were deficiencies with
the process by which options were granted at CNET, including in
some instances the backdating of option grants, during the period
from the Company's IPO in 1996 through at least 2003. -- These
deficiencies resulted in accounting errors, which the Company has
previously announced will result in a restatement. -- A number of
executives of the Company, including the former CFO and the
recently resigned CEO, General Counsel and SVP of Human Resources,
bear varying degrees of responsibility for these deficiencies. --
The report does not conclude that any current employees of the
Company or any recently resigned employees engaged in intentional
wrongdoing. -- Since 2003, the Company has taken steps to remedy
these deficiencies through personnel changes and improved internal
controls. The Special Committee recommended a number of additional
remedial measures. -- The recently resigned executives and the
directors who received improperly priced options have agreed
voluntarily to have these options repriced to fair market value on
the appropriate measurement date. The Special Committee reported
that it believes that the Compensation Committee relied upon
management to establish and maintain appropriate procedures with
respect to stock option grants. The report stated that it would
have been better practice if the Compensation Committee had
encouraged management to adopt more rigorous procedures and
controls during the 1996-2003 period. In a separate press release
also issued today, the Company also announced that Shelby Bonnie,
CNET's co-founder and the company's chairman of the board and chief
executive officer from 2000 to the present, has resigned as
chairman and CEO. He will remain a director. The Company's general
counsel and head of Human Resources have also resigned. With regard
to Mr. Bonnie, Mr. Jarl Mohn, chairman of the Board of Directors,
commented, "We extend our appreciation to Shelby for his founding
role and many years of service, and for his willingness to work
with the Board and the Company in assisting with this transition.
Shelby's lasting legacy will be the innumerable positive actions he
undertook to make CNET Networks the successful industry leader it
is today." "I apologize for the option-related problems that
happened under my leadership," said Shelby Bonnie. "I believe that
the company has come a long way since 2003 in addressing these
deficiencies, but am deeply disappointed it happened nonetheless."
The Company and its independent auditors are reviewing the findings
of the Special Committee investigation. Management continues to
expect that CNET Networks will need to restate its historical
financial statements to record non-cash charges for compensation
expense relating to past stock option grants. The Company and its
independent auditors are reviewing recent accounting guidance
published by the SEC, and have not yet determined the amount of
such charges, the resulting tax and accounting impact, or which
periods may require restatement. (The Company issued a separate
release today announcing Neil Ashe's appointment as CEO. In
addition, the Company also issued a press release today announcing
that it has modified and extended its solicitation of consents from
holders of its 0.75% Senior Convertible Notes due 2024 and updated
its third quarter and full year guidance.) About CNET Networks,
Inc. CNET Networks, Inc. (Nasdaq: CNET, www.cnetnetworks.com) is an
interactive media company that builds brands for people and the
things they are passionate about, such as gaming, music,
entertainment, technology, business, food, and parenting. The
Company's leading brands include CNET, GameSpot, TV.com, MP3.com,
Webshots, CHOW, ZDNet and TechRepublic. Founded in 1993, CNET
Networks has a strong presence in the US, Asia and Europe.
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