Former St. Louis Blues owner, Michael Shanahan, enters guilty plea

ST. LOUIS - A former owner of the St. Louis Blues hockey team faces sentencing later this year after pleading guilty to a federal charge for backdating stock options.

In a plea agreement reached on Monday, former Engineered Support Systems Inc. co-founder Michael Shanahan Sr. also agreed to repay US$7.9 million. In exchange for the guilty plea on one count of falsifying the records of a publicly traded company, the government dropped 11 other charges against Shanahan. The government also agreed to drop charges against his son, Michael Shanahan Jr.

Assistant U.S. Attorney Jeff Jensen, who handled the case, declined comment because charges are still pending against another former Engineered Support executive, chief financial officer Gary Gerhardt.

Shanahan did not have a listed phone number. His lawyer, Barry Short, did not return a phone call seeking comment.

The 68-year-old Shanahan was the chief executive of Engineered Support Systems, a company that supplied military support and equipment. He led a group of St. Louis businessmen that bought the Blues from Harry Ornest in 1986. The group sold the NHL team in 1999.

A federal grand jury last July charged the Shanahans and Gerhardt with securities fraud. Federal prosecutors accused the men of backdating stock options between 1996 and 2002 in a scheme they claim enriched executives and board members by nearly $20 million.

Prosecutors said the executives were able to retroactively pick dates for stock options that coincided with low points in the company's stock price, allowing them to make greater profits when they exercised the options, according to the indictment.

In his plea, Shanahan did not admit orchestrating the backdating scheme. But the plea agreement said he "knowingly and intentionally signed stock option award letters" with the false date of July 25, 2002.

A sentencing date has not been set. Under federal guidelines, Shanahan could face up to 21 months in prison, though he could get less time due to "substantial assistance" in the case, according to the plea agreement.

Shanahan will pay the $7.9 million he made as a result of the scheme to DRS Technologies, based in Parsippany, N.J. Prosecutors say Gerhardt earned $1.8 million from the scheme, while Shanahan Jr. earned $80,000.