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It's illegal if documents were backdated, certain disclosures aren't made to shareholders and the expense is not properly accounted for in the company's financials. Because the disclosures were almost never made and the expense wasn't properly accounted for the vast majority of executive stock option backdating were illegal. Backdating is when a document is marked (dated) for a date earlier than the actual date. With executive stock options companies were granting options and then dating the documents for an earlier date when the stock price was lower thus inflating the value of their options. For example, ABC company's stock on August 1st is trading at $10/share. In December of that year executives are granted stock options when the stock is trading at $25/share but they backdate the documents to indicate that the options were actually granted back on August 1st with an exercise price of $15/share. If the SEC/IRS can prove that the options were actually granted in December when the options were in the money by $10 and the company backdated the documents and or did not disclose this to shareholders and or report it as an expense then the company made an illegal transaction. Most of this came to a stop in 2002 when new regulations required companies to report stock options within 2 days of the grant date therefore almost eliminating the ability to backdate....almost all of the recent news on backdating is related to practices prior to 2002. Not only is this a potentially criminal practice but if the options were backdated then the company's earnings have to be restated for those periods because when stock options are issued in the money (the exercise price on the option is lower than the current market price) the companies were supposed to record that as an expense thus lowering their earnings.

2007-03-07 07:10:36 · answer #1 · answered by SmittyJ 3 · 0 0

Look, you are the boss and part of your compensation is that you get some stock options every year. But since the price of the options is changing all the time, just exactly when you got them is very important to you. So, the date on which you got the options is something that can be fooled with. Remeber, you are the boss, so you can do it. Maybe. But, it seems illegal as heck, the IRS is after you, and the company's stockholders are going to sue you. Bad idea.

2007-03-07 18:28:22 · answer #2 · answered by ZORCH 6 · 0 0

The IRS is all over companies that did this in the past. You can't do this as an individual. It has to do wih company fair market share value and teh dates of those share values.

2007-03-07 13:42:01 · answer #3 · answered by Anonymous · 0 0

You didn't state in what field u are referring to. In some career fields this is considered tampering and is very ilegal. When in doubt check it out. If your boss is tellin you to do this and you feel this way about it make sure u document who told u, when , and document all pertinent info. If you have these doubts go with your gut instinct.

2007-03-07 13:45:24 · answer #4 · answered by mmbmw2000 4 · 0 0

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