This excerpt taken from the BBBY 8-K filed Oct 10, 2006.
· The special committee determined that:
· The option granting process had control and other deficiencies.
· The Company failed to maintain adequate controls with respect to issuance of options in compliance with the Companys stock option policies; the Companys policies also were not sufficient to ensure compliance with all applicable accounting rules.
· With respect to Committee A, lists of grantees and option amounts were not sufficiently final or determinable on the grant date.
· Among the other process deficiencies found with respect to the Committee A option grants were the delegation to the Companys chief executive officer of the authority to select the annual grant date without explicit conditions or documentation; documentation which in various respects was not complete or timely; and a number of monthly grant dates which
had or appeared to have grant amounts or dates which were inconsistent with the Companys policies.
· There were 31 off-cycle monthly grant dates (i.e., not made on the 15th of the month as required by the Companys policies), 12 of which were at notable low prices. Interviews and the documentation reviewed do not explain the selection of these off-cycle dates. The low prices were suggestive of the use of some hindsight in selecting the low price off-cycle grant dates.
· Various 15th of the month grants were not in compliance with the Companys policies, based on a sample of testing of the monthly grants. These generally involved relatively small grants to non-executive employees. Based on the testing, the timing of the grants were generally not suggestive of intent to provide low grant prices 50% of these non-compliant grants were made at prices higher (and 50% were lower) than the prices on the correct dates.
· Among the process deficiencies found by the special committee with respect to the Committee B grants were the delegation to the co-chairmen and the chief executive officer of the authority to select grant dates and to determine grant amounts without explicit conditions or documentation, although unanimous written consents were later signed with grant dates and amounts; not all grantees were approved prior to the grant date; absence of complete or contemporaneous documentation; and the delegation to the co-chairmen and chief executive officer of the authority to select the date for their own options, even though the grant date was the same as used for general employee grants or other Senior Person grants.