Is backdating stock options illegal
At least 80 companies are under SEC investigation for backdating stock option grants. Is the practice illegal? Last week, federal investigators announced criminal charges against former executives of Brocade Communications Systems, and backdating hinting that more cases may be on the way. Meanwhile, Silicon Valley's top lawyers are scrambling to assuage their clients' fears, and the U. Security and Exchange Commission has said stock the investigation will expand beyond technology companies illegal other publicly traded outfits. Already, some companies have begun restating years worth of financial results. To try to answer some questions about what's going on, CNET News. What illegal stock option backdating? Backdating, which refers to the practice of altering the illegal of grants, is a way for employees of a company to make additional money from stock options. While it's not necessarily illegal, in many cases it could be. Which companies are under investigation? The Securities and Exchange Commission said last week that at least 80 companies are the subject of a probe. Also, some companies have independently confirmed that options been contacted by federal investigators. Those include Altera, Applied Micro Circuits, Asyst Technologies, CNET Networks publisher of CNET News. In addition, other companies, such as Apple Computer and The Cheesecake Factory have announced their own, preemptive investigations. How do stock options work? Stock options give the recipient the right to buy a share of a company's stock at a price called the strike price, which is equal to the value of the stock on a certain date. Think of options as coupons you can sell. The same goes for stock options. If an illegal is able to change the grant date of an option retroactively--for instance, to when the backdating was trading at a lower price--the options become more lucrative. That's what some corporations allegedly did. Stock options by themselves are not problematic or controversial. They're a way to options and retain backdating employees, and they options to align employees' interests with those of shareholders. Millions of Americans hold stock options. What's at issue here is whether some top executives--typically CEOs--committed fraud when obtaining them. How widespread is the practice of backdating? Nobody knows for sure. One method academics have used to measure the pervasiveness of backdating is to review options option grants to executives to see if an unusual number are clustered around dates when the stock is trading at a low value. Then, when the stock increases, the executives benefit. Stock has this technique shown? Erik Liea finance professor at the University of Iowa's College of Business, has evaluated thousands of option grants and found that it was statistically improbable for them not to have been backdated at many companies. A paper click for PDF that Lie and Randall Heron, an associate professor stock Indiana University's business school, published on July 14 estimates that The pair estimates that Under what circumstances is backdating legal or illegal? Backdating is not necessarily illegal. If a company's executives are up-front about it with shareholders and the government, everything's probably fine. The problem, though, is that the allegations that have come to light have not included full disclosure to shareholders, payment of extra applicable taxes, and earnings statements that reflect the modified grant dates. Any of those three categories could yield civil and backdating criminal legal action. What kind of legal charges could companies face? It depends on the individual circumstances. But in general, backdating a stock option without communicating this to shareholders could run afoul of tax laws, securities regulations and laws prohibiting fraud. The Securities and Exchange Commission, the U. Attorney's office in San Francisco, and the U. Attorney's office in New York have been conducting parallel investigations. Stock the IRS get involved? Paul Caron, a visiting professor at the University of San Diego School of Law and author of the Illegal blogoutlined two possible tax law violations in an e-mail to CNET News. Some Bay Area companies have announced that they've been contacted by the U. Attorney's office in northern California. Typically the contact comes in the form of a grand jury subpoena. Altera Applied Micro Circuits Asyst Technologies CNET Networks Equinix Foundry Networks Intuit Linear Technology Marvell Technology Group Maxim Integrated Products Openwave Systems Power Integrations Redback Networks VeriSign Zoran. One consideration, Caron said: Second, do the backdated stock constitute "nonqualified deferred compensation," in which case the companies may be liable for excise taxes? Why are companies restating earnings? If they had stock options that were backdated and not disclosed, that essentially provides executives options other employees, but typically executives with extra compensation. That's an expense that must be disclosed to shareholders. What's going on with Brocade Communications Systems? Federal officials held a press conference on July 21 in San Francisco to announce civil and criminal charges relating to allegations of stock option backdating by former top executives of the networking-gear manufacturer. Gregory Reyes, Brocade's chief executive untilstock Stephanie Jensen, the company's vice president of human resources from toare facing civil and criminal charges. In addition, Antonio Canova, Brocade's former chief financial officer, is facing civil charges. What are the allegations against Reyes? The FBI has not alleged that Reyes backdated stock options for his own financial benefit. Rather, he's accused of backdating stock options to lure an unnamed employee to take a "high-level sales position. Reyes' attorney has defended his client as wrongly accused, saying "financial gain is always the motive in securities fraud cases, and here there was none. There is not even illegal allegation of self-enrichment, or self-dealing. The stock options are awarded just before news, usually positive, is announced. The shares increase options value and--presto--the options are worth more. It works like this: Illegal a conference call on July 13 to announce a federal stock option task forceU. Attorney Kevin Ryan said the task force will be investigating spring-loading as well. Would fixing executives' grant date to, say, July 1 every year fix things? Even if grant dates are fixed and happen at the same time every year, there's still room for shenanigans. Academics have found some evidence that CEOs time the release of negative information to happen just before a scheduled grant date, and release positive information after a scheduled grant date. How did the Sarbanes-Oxley SOX law change things? After Sarbanes-Oxley took effect in Augustcompanies were supposed to report stock option grants within two days. That makes backdating more difficult and is generally thought to have curbed the backdating. But Sarbanes-Oxley probably has not eliminated backdating. A Illegal paper click for PDF by M. Nejat Seyhun, finance professors at the University of Michigan's business schoool, analyzes grants made before and after the law's effective date. They found that about 24 percent of stock option grants are reported late. In a follow-up paper click for PDFNarayanan and Seyhun add: Why is there this emphasis on stock options? Why don't CEOs just ask for a raise? There's an exception in the tax code, however, for "performance-based compensation," which includes stock options. So companies can save on taxes by handing out lucrative stock options instead of lucrative salaries. In addition, executives themselves benefit by exercising the stock option and waiting a year to sell the stock. That qualifies as a capital gain and is currently subject stock only a federal income backdating of only 15 percent. In fact, if Congress had simplified the tax code and made CEO salaries fully deductible, it's likely that no backdating scandal would have occurred. Of course, honest CEOs would help too. What lawsuits have been filed by investors over stock options backdating? Apple faces a number of suits filed on behalf of shareholders and pension plans in federal and state courts in Stock. The complaints, backdating accuse company executives of manipulating stock options to maximize returns, name past and present officers, such as Jobs, Chief Financial Officer Stock Oppenheimer and even Apple board member and former U. Vice President Al Gore. A handful of cases involving similar allegations and parties are pending in California federal court against chipmaker Rambus. And earlier this month, video game software company Activision revealed in a financial filing that it had been sued in Los Angeles Stock Court for "purported improprieties" in its handling of past stock option grants. Other targets of similar suits include semiconductor stock KLA-Tencor and wireless and broadcast communications site operator American Tower. Outside the tech sphere, health care services provider UnitedHealth faces several suits in Minnesota federal court filed by individual shareholders and pension funds claiming the company's top executives and board members received billions of dollars worth of illicit stock option grants. Which came first, iPad or iPhone? Scott Forstall options all options a recent interview at the Computer History Museum. Illegal more iPhone 8 leaks and Sega Forever comes to iOS. This week's biggest tech stories include Travis Kalanick's departure from Uber, the arrival of the OnePlus 5 phone and Tesla's possible entry into the streaming music business. Reviews Best Products Appliances Audio Cameras Cars Desktops Drones Headphones Laptops Monitors Networking Phones Printers Smart Home Software Tablets TVs Virtual Reality Backdating Tech Forums. 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Behind the stock options options At least 80 companies are under Illegal investigation for backdating stock option grants. The tech industry's stock option backdating scandal appears to be options steam. Stock option backdating Some Bay Area companies have announced that they've been contacted by the U. Altera Applied Illegal Circuits Asyst Technologies CNET Networks Equinix Foundry Networks Intuit Linear Technology Marvell Technology Group Maxim Integrated Products Openwave Systems Power Integrations Redback Networks VeriSign Zoran Source: Wall Street Journal database. More stories Tech investor accused of sexual harassment takes leave Adios, backdating. Pilots have a new way to outfox you 20 percent of planet Earth visits YouTube every month Uber 2. Girt by CNET podcast Behind the stock options uproar. Conversation powered by Livefyre. Pilots have a new way to outfox you. Catch the latest iPhone 8 options Which came backdating, iPad or iPhone? Uber's CEO drama, the OnePlus 5 arrives This week's stock tech stories include Travis Kalanick's departure from Uber, the arrival of the OnePlus 5 phone and Tesla's possible entry into the streaming music business.
We were scheduled. to play our first game at 9:00 AM on Saturday morning, as my dad and I were the first to arrive we wandered over to take a look at the brackets, this is when we discovered they had made a mistake, and put our team in the ninth grade division.
Have I taught her all those important things she HAS to know yet.