The Virginia Republican also asked the Army to help another business that gave him similar options.
Congressional rules require senators to disclose to the Senate all deferred compensation, such as stock options. The rules also urge senators to avoid taking any official action that could benefit them financially or appear to do so.
Those requirements exist so the public can police lawmakers for possible conflicts of interest, especially involving companies with government business that lawmakers can influence.
Allen's stock options date to the period from January 1998 to January 2001, when Allen was between political jobs and had plunged into the corporate world. At least twice during his corporate service, companies told the SEC that Allen had failed to promptly file required reports on insider stock transactions.
In March 1999, Commonwealth reported to the SEC that Allen failed to "timely file" a report showing an initial statement of beneficial ownership in the company and a single acquisition of stock. The transactions were subsequently reported, it said.
In April 2000, Xybernaut told the SEC that Allen and all but one of his fellow directors failed to file statements of beneficial ownership in a timely way.
The SEC makes it the responsibility of directors, not their companies, to file insider stock notifications. Those who file them late can face civil penalties.
Allen's office said he considered it the companies' responsibility to file the reports and the SEC never contacted him or took action against him.
In interviews, Allen and his staff sought to play down his corporate dealings, saying they were a good learning experience but did not lead to extraordinary riches — except for a quarter-million-dollar windfall from Com-Net Ericsson stock.
Allen's office said he sold his Xybernaut stock at a loss and has not cashed in his Commonwealth options because they cost more than the stock is now worth. The senator also said he saw no conflict going to work for companies shortly after assisting them as governor.
"I actually got no money out of Xybernaut. I got paid in stock options which were worthless. Commonwealth Biotech asked me to be on their board. Glad to do it. I learned a lot on their board and enjoyed working with 'em, and they seem to be doing all right, I guess," Allen said.
Allen's office said he did not report his Commonwealth options on his past five Senate disclosure reports because their purchase price was higher than the current market value. Allen viewed them as worthless and believed in "good faith" he did not have to report them, aides said.
Allen disclosed the options once — on an amendment to his 2000 ethics report filed three months after the normal filing period ended. He excluded the options from subsequent reports.
"As an ethical matter, it's irrelevant whether the exercise price of those stock options is above or below the current market price of the stock," said Kathleen Clark, a Washington University of St. Louis law professor, former prosecutor and former Democratic congressional aide.
"If he owns stock options, he does have such a financial stake, whether the exercise price is above or below current market value."
Lawyer Marc Elias, who represents Democrats in ethics cases, said the conflict issue is even clearer because Commonwealth gets federal contracts.
"Unlike some other controversies that have come up from time to time, this is a situation where the underlying asset is in a company that has business before Congress," Elias said.
Allen's office acknowledges he has met socially over the years with company executives and his office has granted "routine courtesy meetings" from company lobbyists "to hear their opinion on legislation and issues before the federal government."