The cascading litany of alleged charges is not likely to stop with the Brocade case.Indeed, with more than 80 companies being reviewed by the SEC for potential illegal backdating practices, and one academic study claiming that more than 2,000 companies have engaged in the practice, civil and criminal charges will probably mushroom in the next few months. The purpose of backdating is straightforward: it gives options holders an immediate paper gain, and a real gain once the option is exercised.An example illustrates the potential benefit of backdating to the recipient.
As expected, the charges focused on backdating stock options by doctoring employment documents, neglecting to record the stock-option expense on the company’s books, and misleading investors.
Law360 (January 10, 2007, AM EST) -- The ever-widening stock options backdating scandal has become a major issue not only for companies and their executives, but also for insurers, many of which have identified options cases as a major source of claims for the upcoming year.
Companies have already started cashing in on directors’ and officers’ insurance policies, and as more companies are affected, there could be significant consequences for insurers.“To date, DOJ and the SEC have announced more than 120 investigations and numerous shareholder suits have been filed,” said Ballard Spahr...
Backdating is the practice of marking a document, whether a check, contract or other legally binding document, with a date that is prior to what it should be.
Backdating is usually disallowed and even can be illegal or fraudulent based on the situation.