Options backdating cases


16-Feb-2017 11:48

options backdating cases-84

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“In the atmosphere of public concern of corruption (in the post Enron era), stock options backdating was attractive to prosecutors because they wanted to score a big victory but they didn’t think it through,” Weisberg said.

“They should resist pressure to satisfy the public interest (by) scapegoating.” The case is the second major stock options backdating trial to be hit by allegations of prosecutor abuses.

(In fact, it can be argued that if these conditions hold, there is little reason to backdating options, because the firm can simply grant in-the-money options instead.)David Yermack of NYU was the first researcher to document some peculiar stock price patterns around ESO grants.

In particular, he found that stock prices tend to increase shortly after the grants.

Further, at-the-money options are considered performance-based compensation, and can therefore be deducted for tax purposes even if executives are paid in excess of

Further, at-the-money options are considered performance-based compensation, and can therefore be deducted for tax purposes even if executives are paid in excess of $1 million (see Section 162(m) of the Internal Revenue Code).

Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.

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Further, at-the-money options are considered performance-based compensation, and can therefore be deducted for tax purposes even if executives are paid in excess of $1 million (see Section 162(m) of the Internal Revenue Code).Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.Backdating allows executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.Marmaro had argued that the indictment should be dismissed because of numerous instances of prosecutor misconduct amounting to bullying and threatening witnesses, and due to the government’s inability to show that Ruehle committed a crime. Carney came down hard on Stolper, finding that he conducted a “campaign of intimidation” to force Broadcom co-founder Henry Samueli and human resources manager Nancy Tullos to plead guilty to crimes they did not commit and left former General Counsel David Dull “hanging in the wind” by failing to either charge or clear him for almost two years. The judge also questioned whether the government ever had proof of crimes at Broadcom, which engaged in “the exact same” accounting practices as Apple Inc () by backdating stock options.

million (see Section 162(m) of the Internal Revenue Code).

Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.