News & Events

Lie Study Has Legs

Eighteen CEOs swept out. More than a hundred public companies under federal investigation and more than $5 billion in profits erased by restatements. Indictments so far: five former top executives at two companies, Brocade Communications Systems Inc. and Comverse Technology Inc. The toll of the stock options-timing affair -- corporate America's scandal of the year -- has been heavy. Federal officials say more prosecutions will be brought in 2007 over manipulation of the timing of stock option grants to enrich top company executives. Nearly every business day, more companies report federal or internal investigations. New lawsuits by shareholders are filed. More businesses disclose that because past option grants may have distorted their financial results, they may have to restate earnings. Next year could well bring more restatements, and companies' stock could be stripped from public trading because reviews of options grants made them late in filing their quarterly financial reports. Will there be more? Just over 2,000 public companies, or 29 percent of those in the United States that give stock options to executives, have timing issues, said ERIK LIE, an associate professor of finance at the University of Iowa, and Randall Heron, an Indiana University associate finance professor. Their research last year helped focus attention on a widespread pattern of conduct. The Record is published in New Jersey. The same story appeared on the Web sites of the SEATTLE POST INTELLIGENCER, READING (Penn.) EAGLE and ARLINGTON HEIGHTS (Ill.) DAILY HERALD.

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