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Lie Uncovered Backdating Of Stock Options

ERIK LIE loves academic life. The University of Iowa associate finance professor is free to research whatever topic intrigues him, and his $160,000-plus income goes a nice long way in Iowa City. It's particularly good now that Lie's research is having a major impact on corporate America. His mid-2005 research first suggested that hundreds of companies may have routinely manipulated stock- option accounting rules to sweeten top executives' paydays. A later study done with his research partner, Indiana University associate professor Randall Heron, puts the number at 2,000, or 29 percent of all public corporations. The scandal is creating a financial windfall for Lie. He and Heron have created a limited partnership now that the initial crush of calls from reporters has given way to people willing to actually pay for their insights. Lie says he has earned around $100,000 from hedge funds and other investors, who pay him to handicap whether a company's options irregularities are harmless paperwork errors or the kinds of fraud that lead to CEO ousters and big civil penalties.

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