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Lie's Research Partner Discusses Backdating Issue

Silicon Valley's long-running obsession with stock options is turning into a sordid affair. With each passing week, more companies in high-tech's heartland have become entangled in internal or government inquiries examining whether a few insiders rigged employee stock options to ensure larger windfalls without properly disclosing or accounting for the manipulation. The fallout threatens scores of companies with hefty bills to cover delinquent taxes, regulatory fines and shareholder lawsuits purporting financial deception. Criminal charges could be filed if federal prosecutors find evidence of deliberate fraud. So far, stock option probes have been disclosed by at least 57 companies, including 25 based in Silicon Valley or other parts of the San Francisco Bay area. Based on his research with University of Iowa professor ERIK LIE, Randall Heron, an Indiana University associate professor of finance whose research into deceptive option awards helped focus attention on the issue, predicts both numbers will quadruple by year's end.


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