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Lie: Backdating Acceptable If Disclosed Up Front

Securities regulators and federal prosecutors have launched a wide-ranging examination into whether companies around the nation backdated option grants to give executives the opportunity for a bigger payday. Fifty companies, including Home Depot and Apple, have been caught up in various investigations. Randall Heron, an associate finance professor at Indiana University who has researched the issue, expects the number to go much higher. Backdating options can be acceptable conduct, as long as it is disclosed and companies account for it in both financial statements and for taxes, according to both Heron and ERIK LIE, the University of Iowa professor whose research raised questions on the practice. The paper is based in New Jersey.

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