New Trouble for Sen. George Allen

As if Macaca wasn't enough, there's this:

Stock options that Senator George Allen described as worthless were worth as much as $1.1 million at one point, according to a review of Senate disclosure forms and U.S. Securities and Exchange Commission filings. The records appear to contradict remarks he made to the Associated Press. ``I got paid in stock options which were worthless,'' AP quoted him as saying.

Allen served as a board member of Chantilly, Virginia-based Xybernaut Corp. from 1998 until December 2000 and was awarded options on 110,000 shares during that period. His Senate financial disclosure form for 1999, required for candidates as well as officeholders, doesn't report that he owned the options.

[Hat tip Patriot Daily.]

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  • Re: New Trouble for Sen. George Allen (none / 0) (#1)
    by roy on Tue Oct 10, 2006 at 10:45:39 AM EST
    Not only is the "worthless" claim apparently false under these specific circumstances, it's nonsensical. Stock options always have value, so long as the company is in business. The closest options get to "worthless" is when the strike price on the option is above the market price of the stock. In that case, exercising the option would be equivalent to losing money. However, holding on to your options without exercising them is not a liability, and the options have at least a pittance of speculative value because the market price might increase in the future so you can exercise them for a profit. So options might be "worth less" than regular stock, but not "worthless". They have value in at least the same way a lottery ticket has value. (This isn't my area of expertise, but as a lower lower middle manager I've had to take a few classes)

    Re: New Trouble for Sen. George Allen (none / 0) (#2)
    by Talkleft Visitor on Tue Oct 10, 2006 at 02:46:50 PM EST
    Roy, There are plenty of ways in which the options could be worthless. The most obvious is if they were "restricted". There were lots of people in the '98-'00 window who were "paper" millionaires because of options but were unable to excercise any of those options for legal reasons until well after the underlying stocks dropped to zero. Options are like a post dated check. All of the value is potentially in the future.

    Re: New Trouble for Sen. George Allen (none / 0) (#3)
    by roy on Tue Oct 10, 2006 at 03:27:07 PM EST
    Options are like a post dated check.
    For options you aren't allowed to exercise or sell yet, or which are under water, yeah, that's my point. Even a post dated check has some value right now because it might have real value later. Which would you rather have: a post dated check, or nothing whatsoever? In other words, anything which might have value in the future has value now, if only due to speculation gambling on that future value.

    Re: New Trouble for Sen. George Allen (none / 0) (#4)
    by Sailor on Tue Oct 10, 2006 at 04:56:03 PM EST
    Gentlemen; it doesn't matter about their value, the congressional rules state he had to report them. In addition, from the article:
    In the Senate, Allen opposed an accounting rule change that requires companies to list options as an expense on their financial reports. Allen co-sponsored a measure to block the rule change and in a hearing that year linked the awarding of stock options to increasing the security of U.S. troops in Iraq.
    I wonder why he would have sponsored that bill!?