Here's the latest installment from the NYT on the options pricing scandal. In this article, the Times discusses how one company, Micrel Inc., followed a policy of granting options to new employees at the lowest price in the 30 days preceding the employee's hiring. Granting in-the-money options was helpful to this Silicon Valley company in recruiting new employees. According to the article, the practice followed by Micrel was fairly widespread in Silicon Valley.
Initially, according to the article, Deloitte approved the practice. Later, Deloitte backed off of its approval and told the company it needed to restate its financials. The company also ran into problems with the IRS over the practice, but eventually resolved the tax issues. The company is now suing Deloitte over what it says was flawed accounting advice. The total tab for the mispriced options is around $59 million.