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Stock Option Backdating
'Where were these professionals when these clearly improper transactions were being consummated? Why didn't any of them speak up or disassociate themselves from the transactions?' Lincoln Sav. & Loan Ass'n v. Wall, 743 F. Supp. 901, 920 (D.D.C. 1990) (Sporkin, J.).
Just as the business community began making headway with Congress to reduce Sarbanes-Oxley (SOX) obligations, a new type of corporate wrongdoing has been revealed ' backdated stock options used by the executives at many companies and some directors to convert their options at the most opportune times and at the expense of other shareholders and investors. What is troubling is how the boards of directors at so many companies could have approved the backdating or not known about it after SOX and the recent wave of high-profile corporate fraud investigations and prosecutions.
Criminal charges have already been lodged against some high-ranking corporate executives. See DOJ Press Release, 'Former Executives of Comverse Technology Inc. Charged with Backdating Millions of Stock Options and Creating a Secret Stock Options Slush Fund' (Aug. 9, 2006), www.usdoj.gov/opa/pr/2006/August/06_odag_517.html; and 'Brocade Executives Indicted' (Aug. 12, 2006), lawprofessors.typepad.com/whitecollarcrime_blog/2006/08/brocade_executi.html. Public companies have been forced to restate their earnings and witness their stock values tumble following the negative publicity from acknowledging that they had incorrectly accounted for and reported stock option grants in prior years.
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