Backdating charges filed

John Dimsdale Jul 21, 2006

TEXT OF STORY

CHERYL GLASER: Here at home, US regulators have started their crackdown on companies accused of backdating stock options. Two former executives with Brocade Communications were charged yesterday, as John Dimsdale reports


JOHN DIMSDALE: Gregory Reyes is the first former chief executive brought up on criminal charges of fraudulent dating of stock options. But he’s unlikely to be the last.

Federal investigators say they’re looking at some 80 companies accused of changing the dates on stock option offers to benefit employees.

Research by Indiana University professor Randall Herron found more than two thousand companies manipulated option dates going back to 1995.

RANDALL HERRON: There are a lot of companies that were doing this and I think in the cases where its egregious like this, it’s a strong signal from the SEC that they’re not gonna put up with it.

Reyes’ lawyer says the former CEO never personally benefited from stock option backdating and therefore didn’t commit a crime.

Some regulators argue manipulating option dates can be a valuable business tool, helping companies that have more promise than profits afford more talented employees.

The question is now up to the courts.

In Washington, I’m John Dimsdale for Marketplace.

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