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Likewise, in a case involving Comverse Technology Inc., the U. Attorney charged the former CEO, the former CFO, and the former General Counsel with violating securities laws.In that case, corporate officers inserted backdated option grant dates into board of directors’ unanimous written consents that were transmitted to the compensation committee.And in addition to officer and director bars imposed by government authorities, internal investigations have led to numerous officer resignations from at least 25 companies including Quest Software, KB Homes, United Health Group, Inc., Mc Afee, Inc., CNET Networks, Inc., and Monster Worldwide.Even Apple Computer CEO Steve Jobs was implicated by an internal investigation into backdating, although he apparently did not receive, or otherwise benefit from, the backdated grants.With its attendant investigation, legal actions and executive fallout, the practice of options backdating is expected to have a short shelf life.But while options backdating may have a truncated life expectancy, its current impact is robust.Not surprisingly, the defendants themselves earned millions of dollars from backdated options.

Professor Lie concluded that the robust profitability of so many options was statistically impossible absent some artificial influence such as backdating.As in other enforcement areas, the SEC has a penchant for pursuing through civil actions matters that involve blatant and intentional misconduct.Of course, the imposition of an officer and director bar against those who are intimately involved with the backdating process can result in a corporation losing its founder or other key management personnel.The Internal Revenue Service has also joined a number of investigations due to the tax implications of options backdating, both with respect to the individuals who received the backdated options as well as the corporations that failed to account properly for the options when they were granted.Of course, disparity between a reported grant date and the actual grant date is not always intentional.Under previous regulations, corporations could wait 45 days or, in some cases, over a year to report options, thus providing ample time for backdating.Other similar practices are being reviewed by government officials as well.However, the fact of the option grants, their strike price and their eventual profitable exercise are in most instances disclosed.Thus, in the context of options backdating, substantial doubt exists as to the viability of shareholder claims.Plaintiffs’ lawyers have seized upon this issue as yet another opportunity to bring cases against corporations and their officers and directors.Such cases are brought under the guise of both class actions and shareholder derivative proceedings.


  1. Feb 26, 2007. malfeasance in the form of stock option backdating. scribing "at the money" options; see also Erik Lie, Backdating of Executive Stock Option.

  2. Erik Lie is a Norwegian finance professor at the University of Iowa who published a report about options backdating that led to many investigations by the SEC.

  3. Nov 11, 2010. The backdating scandal was set off in 2005 after Erik Lie, a finance professor at. Irrespective of whether stock-options backdating resulted in.

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