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Likewise, in a case involving Comverse Technology Inc., the U. Attorney charged the former CEO, the former CFO, and the former General Counsel with violating securities laws.
In that case, corporate officers inserted backdated option grant dates into board of directors’ unanimous written consents that were transmitted to the compensation committee.
The backdating problem was first highlighted by Professor Erik Lie of the University of Iowa, who published his initial study in 2004.
Professor Lie concluded that the robust profitability of so many options was statistically impossible absent some artificial influence such as backdating.
Class actions ostensibly are brought on behalf of the shareholders of the company who have been impacted by the option grants.
Other similar practices are being reviewed by government officials as well.Options were also backdated for new employees to dates prior to the date employment actually commenced.In addition, hundreds of thousands of backdated options were issued to fictitious employees and parked in a slush fund to be awarded at the CEO’s discretion.But even if no criminal charges are filed, the SEC still can bring a civil fraud action in federal court.This sort of case can be brought against the corporation and its officers and directors and can result in the disgorgement of profits, stiff monetary penalties, and prohibitions against officers and directors serving any public company in those capacities in the future.