2009-09-07 Page 1 of 18
FILED
IN OlERK'S OFFICE
W§ [)jSTRICT COURT E.D.N.V
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NEW YORK
it. SEP 03 2009 *
SECURITIES AND EXCHANGE BROOKLYN OFFICE
COMMISSION,
Plaintiff, .RBN" · 3826
C IV
ECF
C 0.: _ _-cv- _
vs.
THE HAIN CELESTIAL GROUP, INC.,
Defendant.
COMPLAINT
BOYLE", M:~J;'
Plaintiff Securities and Exchange Commission ("Commission") alleges:
SUMMARY OF ALLEGATIONS
1. From at least 1998 to 2002, Defendant The Hain Celestial Group, Inc. ("Hain" or
the "Company") fraudulently backdated stock options granted to Company officers, directors,
and employees, concealing millions of dollars in expenses from the Company's shareholders.
Hain and its former Chief Financial Officer ("CFO") and Secretary used hindsight to choose
dates corresponding to low stock prices for stock option grants, backdated stock option
agreements to make it appear as if options had been granted on the earlier dates, and prepared or
approved fmancial statements and SEC filings that omitted necessary expenses for backdated
options and falsely described Hain's option granting practices. Hain and its former CFO ~so re
priced grants that had previously been approved, but for which stock option paperwork had not
yet issued, to give recipients the advantage of subsequent lower exercise prices.
2. Under accounting principles in effect throughout the relevant period, Hain was
required to record an expense in its fmancial statements for any stock options granted below the
current market price ("in-the-money"), while the Company was not required to record an
Document obtained from www.BackgroundNow.com. For additional assistance, contact Lee Hill. 1 (713) 784-3232 x3
2009-09-07 Page 2 of 18
expense for options granted with an exercise price equal to ("at-the-money") or above ("out-of
the-money") the fair market value ofthe stock. Hain also was required to apply variable
accounting treatment to any options that were re-priced after being approved. Hain's backdating
and re-pricing enabled it to attract and retain talent by giving in-the-money options without
recording an expense.
3. By virtue ofthe undisclosed backdating and re-pricing scheme, Hain materially
understated the Company's expenses and overstated its income in disclosures to the Commission
and the investing public, and falsely represented in filings that Hain had incurred no expenses for
option grants.
4. Furthermore~ throughout the period of 1993-2005, Hain did not have adequate
internal controls relating to the granting of stock options and did not maintain accurate books and
records concerning its stockoption grants.
5. In January 2008, Hain re-measured 48 historical option grants and restated its
results to record $20.5 million of compensation expense, which combined with other adjustments
resulted in a total cumulative adjustment of$16.9 million, resulting in at least a five percent
change in the company's originally reported