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Lie Confident in Backdating Claims

Investors' faith in corporate accounting again is under siege. Over the last few months, more than 50 companies--most of them technology firms--have disclosed that they were under investigation by federal authorities for possibly manipulating executives' stock-option grants to boost the potential payoffs. The possibility of widespread backdating of option awards was proposed by ERIK LIE, an associate professor with the University of Iowa's business college, in a May 2005 research paper. He looked at nearly 6,000 option awards from 1992 through 2002, using company disclosure reports filed with the Securities and Exchange Commission. What he found was a pattern of abnormally large stock price gains immediately after unscheduled option grants--those that weren't awarded at the same time each year, he said. In an interview, Lie said he believed that many more companies were likely to be probed for backdating. "I'm quite confident we're talking about hundreds of companies that have done this," he said.


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