News & Events

UI Professor Discovered Backdating

The feds have fired their first official salvo in the stock-options backdating scandal, filing criminal and civil charges against executives at San Jose's Brocade Communications Inc. on Thursday. SEC Chairman Christopher Cox used strong language at Thursday's announcement in San Francisco, saying backdating in many cases "makes a hash of (companies') financial statements" and is "poisonous" to efficient markets. Many other companies now in the spotlight have only been under scrutiny for a couple of months, so it may be quite awhile before they could be charged. The sheer weight of cases eventually could work to the advantage of companies that practiced backdating. Business professors at Indiana University and the UNIVERSITY OF IOWA estimate that about 29 percent of 7,774 U.S. companies may have backdated or otherwise manipulated their option grants from 1996 to 2002.

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