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Lie Research Leads to Award for Wall Street Journal

The Wall Street Journal has received one of investigative journalism's top awards for a series of reports on stock options backdating that was based on research from University of Iowa finance professor Erik Lie.

The ongoing series, "Perfect Payday," exposed the widespread practice of secretly backdating stock option grants to benefit corporate insiders. It was honored with the 2006 Philip Meyer Award, presented jointly by the schools of journalism at the University of Missouri-Columbia and Arizona State University for investigative journalism that utilizes social science research methods. The award was announced Wednesday.

"Lead writers Charles Forelle and James Bandler used a statistical model to calculate the wildly improbable odds that options grant dates would just happen to be so favorably profitable to dozens of executives at some of the nation's best-known companies," the contest judges said. "Their stories about the scandal have spurred an ongoing federal securities investigation into rigged options at more than 100 companies to date."

The series was based on material provided to the Journal by Lie, a professor in the Tippie College of Business, who had studied the questionable timing of stock options grants for several years. He said he's pleased that the Journal's confidence in his research has been rewarded.

"Charles and James did wonderful work, and you have to give the whole Wall Street Journal organization credit for putting that much faith and effort into one project," he said. "They spent four months researching the data I brought to their attention, and reporting and writing that first story, and that's a significant amount of resources for a newspaper to commit to covering a single issue. They should be commended."

Lie began researching stock options in 2002 and soon noticed that many executives were consistently granted stock options on days when their companies' stock was at its lowest price. The research suggested the options were being backdated, which violates federal law. He published his first piece on the issue in an academic journal in 2004 and later met with Forelle and Bandler to discuss his research, in December 2005.

The Journal continues to cover the backdating issue and regularly breaks new stories, though Lie is no longer involved with the reporting.

The Philip Meyer contest included work published or broadcast between October 2005 and October 2006 and attracted entries from across the U.S. and Canada. The awards are in honor of Philip Meyer, the Knight Chair in Journalism at the University of North Carolina at Chapel Hill. Meyer is the author of Precision Journalism, the seminal 1973 book that encouraged journalists to incorporate social science methods in the pursuit of better journalism.

The awards are administered by the National Institute for Computer-Assisted Reporting, a joint program of Investigative Reporters and Editors and the Missouri School of Journalism, and the Knight Chair in Journalism at the Walter Cronkite School of Journalism and Mass Communication at Arizona State University. The IRE is based at the University of Missouri-Columbia.


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