Mather suit seen focused on Pixar option practices

By Gina Keating

LOS ANGELES (Reuters) - A former Pixar Animation Studios chief financial officer, expecting a stock options backdating suit by U.S. regulators, may argue that Pixar's board, outside lawyers and auditors approved backdating long before she was hired, a source familiar with the case said.

Ann Mather, who served as Pixar's chief financial officer through mid-2004 and now sits on Google Inc's board, on Monday divulged that the Securities and Exchange Commission may sue her for backdating at the animation company.

Mather's attorney said earlier this week that there was no basis for an SEC lawsuit against her.

She will have an opportunity to present a defense to the SEC, if she chooses, before the agency decides whether to file suit against her.

Options backdating, a practice in which option grant dates are changed retroactively to allow recipients to reap greater profit, is not illegal as long as it is properly disclosed and accounted for in financial statements.

Pixar is among more than 200 companies that have disclosed internal audits or government probes surrounding options practices. The Wall Street Journal reported Pixar had engaged in backdating as early as 1997.

"What (the policy) said was, 'We look back over the last few months and pick the date that has the lowest stock price. This is in an internal document and discussed very openly -- this is not a big secret what they were doing," said a second person familiar with backdating at Pixar but not approved to speak on the record about it.

An audit of Pixar conducted by new parent Walt Disney Co found backdating of options grants but cleared then-Chief Executive Steve Jobs and anyone then associated with the company of "any intentional and deliberate acts of misconduct," according to a securities filing.