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Options backdating is the practice of granting an employee stock option that is dated prior to the date that the company actually granted the option. This practice raises a number of legal and accounting issues. The practice of backdating itself is not illegal, nor is granting of discounted stock options. What is illegal is the improper disclosures, both in financial records and in filings with the United States Securities and Exchange Commission (SEC).

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Blogs for Backdating

Law Blog - WSJ.com : Updating Backdating

... IRS has joined the backdating brigade, reports the New York ... Permalink | Trackback URL: http://blogs.wsj.com/law/2006/07/28/updating-backdating-2/trackback ...blogs.wsj.com/law/2006/07/28/updating-backdating-2/

Law Blog - WSJ.com : Updating Backdating

... there it is, in all it's glory -- the stock-options backdating icon. What's the occasion? The Law Blog's own ... Trackback URL: http://blogs.wsj.com/law/2007 ...blogs.wsj.com/law/2007/11/19/updating-backdating-3/

TheCorporateCounsel.net Blog: The Widening Option-Backdating Scandal

The Widening Option-Backdating Scandal. TheCorporateCounsel.net Blog ... worth of financials due to option back-dating, trimming off $286 million of net income! ...www.thecorporatecounsel.net/blog/archive/001097.html

backdating Resources | ZDNet

White papers, case studies, technical articles, and blog posts relating to backdating ... Apple Inc., Backdating, Sam Diaz. Blog posts 2008 ... Product Blogs ...updates.zdnet.com/tags/backdating.html

TheCorporateCounsel.net Blog: Officer Exposure for Stock Option Backdating

... the stock option back-dating litigation involving Maxim ... the back-dating and (ii) he kept silent and concealed his knowledge of the backdating ...www.thecorporatecounsel.net/blog/archive/001644.html

Wikipedia About Backdating

Options backdating is the practice of granting an employee stock option that is dated prior to the date that the company actually granted the option. This practice raises a number of legal and accounting issues. The practice of backdating itself is not illegal, nor is granting of discounted stock options. What is illegal is the improper disclosures, both in financial records and in filings with the United States Securities and Exchange Commission (SEC).

In 1992 the SEC imposed a rule requiring companies to report executive stock options in detail. Even after the rule, some executives could legally delay reporting option grants for so long that it was virtually impossible to figure out whether any individual grant had been backdated.

Since the Enron scandal, the U.S. Congress enacted Section 409A of the Internal Revenue Code to deal with such non-qualified deferred compensation. Backdated stock options would be considered discounted stock options triggering additional taxes and penalties at vesting or exercise. Most of the legal issues arising from backdating are a result of the grantor falsifying documents submitted to investors and regulators in an effort to conceal the backdating.

Research history

In 1995, New York University finance professor David Yermack studied data that companies were obligated to publish, under a 1992 SEC decree, in connection with the exact dates of options grants in proxy statements. Previously, dates were disclosed within often ignored filings. Yermack found a pattern that the stock prices often declined in value just prior to the time of the grant of the options, and rose thereafter. He theorized that the executives were timing the awards of the options so that the issuances would precede good news and would follow bad news. In 1997, his findings were published in the Journal of Finance.

Accounting professors David Aboody of UCLA and Ron Kasznik of Stanford followed with a study of companies that grant options at the same time every year. Aboody and Kasznik found a similar pattern. Their evidence suggests that company executives time the release of news. The findings of Aboody and Kasznik were published in the Journal of Accounting Economicsin 2000.

In 2004 Finance professor Erik Lie of the University of Iowa asserted that many options grants were timed to exploit marketwide price depressions that nobody, including insiders, could predict — leading to the conclusion that at least some of the grants must have been retroactive.

In 2007, Mark Maremont, Charles Forelle and James Bandler of the Wall Street Journal won a Pulitzer prize for their investigative series on stock options backdating.

Terminology

  • bullet dodging - delaying an options grant until just after bad news
  • spring-loading - timing an options grant to precede good news
  • symmetric spring-loading - where members of the board who approve the grant are aware of the forthcoming good news
  • asymmetric spring-loading - where members of the board who approve the grant are unaware of the forthcoming good news

Search results for Backdating

Backdating

Under most circumstances, backdating is seen as ... The Dangers Of Options Backdating - This form of executive compensation can pose ...www.investopedia.com/terms/b/backdating.asp

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The Actuarial Value of Life Insurance Backdating

Figures 2 and 4 clearly illustrate that the costs and benefits of back ... Thus, back- dating is, in a sense, risk arbitrage from the consumer's viewpoint: risk ...www.math.ilstu.edu/krzysio/Backdating.pdf

options backdating: Definition from Answers.com

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Stock Options: The Backdating Issue

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News about Backdating

Broadcom co-founder Samueli stays in plea deal

EETimesBroadcom Corp. co-founder Henry Samueli agreed Tuesday to remain in a plea deal in a stock options backdating case without an agreed-upon sentence, and now faces up to five years in prison at his sentencing next year, U.S. Attorney's Office spokesman Thom Mrozek said. http://www.eetimes.com/rss/showArticle.jhtml?articleID=21120...

Broadcom co-founder bets he can still avoid prison

AP via Yahoo! News Broadcom Corp. co-founder Henry Samueli is gambling that an appeals court will accept a plea deal that would spare him prison time in one of the nation's largest stock options backdating cases.http://news.yahoo.com/s/ap/20081014/ap_on_hi_te/broadcom_bac...

Broadcom co-founder bets he can still avoid prison

USA TodayBroadcom Corp. co-founder Henry Samueli is gambling that an appeals court will accept a plea deal that would spare him prison time in one of the largest U.S. stock options backdating cases.http://www.usatoday.com/tech/news/2008-10-14-broadcom_N.htm?...

UnitedHealth 3Q profit falls but eases analysts

AP via Yahoo! News UnitedHealth Group Inc. reported a 28 percent drop in third-quarter profit Thursday, but the insurer also reassured Wall Street with a performance that met or surpassed expectations in several areas.http://news.yahoo.com/s/ap/20081016/ap_on_bi_ge/earns_united...

Broadcom co-founder leaves guilty plea in place

AP via Yahoo! News Broadcom Corp. co-founder Henry Samueli plans to appeal a judge's rejection of the plea deal he made with prosecutors in one of the nation's largest stock options backdating cases.http://news.yahoo.com/s/ap/20081014/ap_on_hi_te/broadcom_bac...

News about Backdating

Insurer UnitedHealth posts lower 3Q profit

Minneapolis Star TribuneThe company announced in July an $895 million payout to settle a class-action lawsuit over options backdating, a problem it has been wrestling with since 2006. The issue had led to the forced departure of former CEO Bill McGuire, who helped build ... http://www.startribune.com/local/31098474.html?elr=KArks:DCi...

Broadcom co-founder Samueli stays in plea deal

ReutersLOS ANGELES, Oct 14 (Reuters) - Broadcom Corp (BRCM.O: Quote , Profile , Research , Stock Buzz ) co-founder Henry Samueli agreed on Tuesday to remain in a plea deal in a stock options backdating case without an agreed-upon sentence, and now faces up ... http://www.reuters.com/article/marketsNews/idUSN145305112008...

UnitedHealth's revenue beats expectations

CNN MoneyThe company also took a 3-cents-per-share charge in the quarter related to settlements of some class-action lawsuits over options backdating and saw a steep drop in investment income to $143 million. But Hemsley assured analysts that the company's ... http://money.cnn.com/2008/10/16/news/companies/united_health...

Technology - AP

Yahoo News ... still avoid prison Tue Oct 14, 2:18 PM ET SANTA ANA, Calif. - Broadcom Corp. co-founder Henry Samueli is gambling that an appeals court will accept a plea deal that would spare him prison time in one of the nation's largest stock options backdating ... http://news.yahoo.com/i/528

CEOs lose millions as option values plummet

Minneapolis-St Paul Business JournalStock options came under further scrutiny when former UnitedHealth Group CEO Bill McGuire resigned amid an investigation into the backdating of stock options. Compensation experts, however, aren’t ready to ring the death knell for stock options yet ... http://twincities.bizjournals.com/twincities/stories/2008/10...

Search results for Backdating

Options Backdating

Options Backdating - Definition of Options Backdating on Investopedia - The process of granting an option that is dated prior to the date that the company granted that option.http://www.investopedia.com/terms/o/optionsbackdating.asp

Options backdating | Walking the plank | Economist.com

This article is premium content. In order to gain access to it please either Log in, Activate your complimentary web account if you are a print subscriber, or Subscribe nowhttp://www.economist.com/business/displaystory.cfm?story_id=...

Backdating legal definition of Backdating. Backdating synonyms by the ...

Predating a document or instrument prior to the date it was actually drawn. The negotiability of an instrument is not affected by the fact that it is backdated.http://legal-dictionary.thefreedictionary.com/Backdating

Barnet Online - Backdating claims

Information about backdating of benefit claims ... Benefit usually starts from the Monday following the date a claim is received at this office or at the Department for Work and ... http://www.barnet.gov.uk/backdating-claims

Focus in Apple's options scandal shifts to its board

In the same breath, Anderson questioned the conduct of Apple's board of directors regarding options backdating. And Anderson is not alone in his criticism of the Apple board.http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/05/03/...
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Videos found for Backdating

Willard: Steve Jobs is Right on DRM...

Willard: Steve Jobs is Right on DRM, Wrong on BackdatingApple's chief shows record companies the light, but what is he hiding from shareholders?Flash - Video

Fast Forward: Apple backdating opti...

Fast Forward: Apple backdating options probeFortune's David Kirkpatrick discusses Apple's former CFO's accusations that Steve Jobs granted him backdated options.Windows Media - Video

Backdating Conviction

Backdating ConvictionFormer Brocade CEO Gregory Reyes was found guilty, and CNBC's Jim Goldman has the story.Windows Media - Video

Mass. companies are backdating stoc...

Mass. companies are backdating stock optionsA number of Mass. companies have become the center of federal inquiries in recent months. Most of the focus is on backdating stock options. Joan Goodchild from the Boston Business...Flash - Video

Apple Backdated Stock Options

Apple Backdated Stock OptionsDiscussing Apple backdating stock options for CEO Steve Jobs.Flash - Video

Answers for Backdating

drricky40If backdating Stock options is legal then why is the Apple guy?drricky40Actually it is grand larceny. And all the SB ought to be in jail. They stole millions from their shareholders--the owners of the company.Greg HBackdating a company director?Greg Hjoe mNeed to find specific court case and/or court record for an individual backdating to 1989 in Los Angeles, Ca.?joe mSAME ! But mines for 1997 in south englandgabagabaheyIs it illegal to backdate stock options at the highest price & distribute them to employees?gabagabaheyof course it is. But I think you mean backdating stock options to the lowest price. At the very least it's illegal tax evasion. It's also a breach of the fiduciary duty of the directors/CEO towards...QuestionzIn accounting is it ethical to backdate adjusting entries?Questionz
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