“We deeply regret the inconvenience to borrowers who received improperly dated letters as a result of errors in our correspondence systems,” a spokesperson for Ocwen said. In the case of the 283 borrowers in New York who received letters with incorrect dates, 281 are currently borrowers with us.
We are continuing to review the rest of the cases.” A full copy of the Lawsky letter can be read here.
The number of shares subject to option was 250,000 and the exercise price was (the trough in the stock price graph below.) Given a year-end price of , the intrinsic value of the options at the end of the year was (-) x 250,000 = ,750,000.
In comparison, had the options been granted at the year-end price when the decision to grant to options actually might have been made, the year-end intrinsic value would have been zero.
However, he only realizes this in January and so wishes to backdate the document to December.
The event did not happen during the time period required for the benefit so an attempt is being made to pretend that it did.
This is a fraud on the tax authorities, a criminal offence and is likely to get the lawyer who prepared the document disciplined by his regulator and possibly also charged as a co-conspirator.
Most shareholder approved option plans prohibit in-the-money option grants (and thus, backdating to create in-the-money grants) by requiring that option exercise prices must be no less than the fair market value of the stock on the date when the grant decision is made. For example, because backdating is used to choose a grant date with a lower price than on the actual decision date, the options are effectively in-the-money on the decision date, and the reported earnings should be reduced for the fiscal year of the grant.If the document is putting in place something which “should have been done” but hasn’t been, usually for tax or similar reasons, then the position is straightforward.For example, if a seller had sold his house in December then the seller could have taken advantage of certain tax benefits.Holders of Veterans' Affairs Gold Cards marked ' Dependent' are not eligible.New York Department of Financial Services Superintendent Benjamin Lawsky alleges that Ocwen Financial (OCN) has been backdating potentially hundreds of thousands of letters to borrowers “likely causing them significant harm.” Ocwen has been in Lawsky’s crosshairs since February, when it put a .7 billion mortgage servicing rights deal between Ocwen and Wells Fargo (WFC) on an indefinite hold.
“Even worse, Ocwen did nothing to investigate or address the backdating issue when an employee questioned the accuracy of Ocwen’s letter dating processes and alerted the company’s Vice President of Compliance.