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Cablevision Missteps Again

After acknowledging last week that it had granted stock options to one of its executives after he died, once again, Cablevision Systems will endure a humiliating spanking in front of investors. The disclosure makes the cable operator the most bizarre of the more than 100 companies caught "backdating" options, creating a windfall by artificially lowering their exercise prices below the market price on the day the options were actually issued.

Cablevision did not identify the executive, but Wall Street executives say the disclosure refers to late Vice Chairman Marc Lustgarten, who was an officer at the time of his 1999 death from pancreatic cancer.

The transaction is one of a series that were improperly reported, prompting Cablevision to admit that it had given executives $89 million more than it had accounted for to investors.

However, unless federal prosecutors find evidence of crimes and actually convict someone, the disclosure of this latest odd game inside Cablevision is unlikely to change the behavior of controlling shareholder and Chairman Chuck Dolan or his son, President James Dolan. Wall Street is shrugging off the latest disclosure, just as it has past corporate missteps.

Many times, Cablevision stock has taken a bad hit, but investors have always rallied back. Last year, the two Dolans fought bitterly over failed satellite-TV venture Voom, valued at $1.4 billion. Then the company stunned investors with a last-minute $16.5 billion bid to buy Adelphia Communications, renouncing years of preaching the benefits of focusing on its strong metro-New York clusters. Subsequently, Chuck Dolan made a serious attempt to take Cablevision private. That plan fizzled when the board demanded a better price. The list goes on.

Cablevision’s stock barely nudged down, off less than 3% after the company filed with the SEC. Citigroup analyst Jason Bazinet’s report to clients is typical, headlined "A positive development." Gaffes aside, Cablevision’s operations remain the strongest in the cable business.

It’s easy to understand why the Dolans would want to do Lustgarten’s family a special favor. He had already earned tens of millions of dollars from the company, but he was a trusted confidant of Chuck Dolan and a mentor to James Dolan. He was seemingly the only person who could calm the often fractious relationship between father and son.

A strong, forceful man, it was sad to watch Lustgarten wither as the cancer and failed treatment progressed. And too bad for the Dolans. They could certainly use his counsel today.