Erik Lie: Execs May Have Manipulated Dates To Cheat On Taxes
Bookmark & ShareDecember 13, 2006
In a paper that began circulating in recent days, a Securities and Exchange Commission economist concludes there is strong statistical evidence that executives manipulated the exercise dates of their options as part of a tax dodge. The new information could open another front in the options-backdating scandal. ERIK LIE of the UNIVERSITY OF IOWA, whose work broke open the scandal, has been working with other academic to analyze the exercise dates. Although preliminary, their new research found that 13 percent of the exercises by CEOs who followed an "exercise-and-hold" strategy and didn't immediately report the actions to the SEC came at their stock's lowest price of the month. That percentage is nearly three times as great as would be expected if CEOs were exercising on random dates, and is highly suggestive that some were backdating exercises to avoid taxes.
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