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BUSINESS CRIMES BULLETIN

December 2006

Stock Option Backdating

Where Were the Lawyers and Auditors?

By Michael E. Clark

Just as the business community began making headway with Congress to reduce Sarbanes-Oxley (SOX) obligations, a new type of corporate wrongdoing has been revealed backdated stock options used by the executives at many companies and some directors to convert their options at the most opportune times and at the expense of other shareholders and investors. What is troubling is how the boards of directors at so many companies could have approved the backdating or not known about it after SOX and the recent wave of high-profile corporate fraud investigations and prosecutions.

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