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Backdating probe lawsuits

Janet Babin Jun 15, 2006
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Backdating probe lawsuits

Janet Babin Jun 15, 2006
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TEXT OF STORY

TESS VIGELAND: Also on Wall Street, more lawsuits are expected against companies that allegedly backdated stock options for executives. At least 40 companies are the focus of a federal investigation into the practice. Marketplace’s Janet Babin has the latest.


JANET BABIN: Lots of companies offer executives stock options as part of their compensation package. But what looks fishy is when an executive grabs the options retroactively at the lowest price and reaps a huge profit later.

Jordan Goodman calls it brazen theft. He wrote the book “Reading Between the Lies” about Wall Street scandals. He says backdating stock options is more widespread than prosecutors realize.

JORDAN GOODMAN: I think when they start getting into it, they’re going to see many, many, probably hundreds of technology companies, have been involved in doing these stock option grants, at prices that are just completely unfair to the average share holder, but wildly profitable for executives.

The Justice Department says those found guilty of manipulating stock options could face prison time.

I’m Janet Babin for Marketplace.

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