Dozens of companies are being investigated for backdating stock options to the days that followed the Sept. 11, 2001, terrorist attacks, and profiting on the back of the equity-market slump that resulted, The Wall Street Journal reported Wednesday.
The latest development is only part of a wider backdating scandal that implicates more than 140 companies and has caused more than 70 firings or resignations of corporate officials, the Journal reported.
The options paid to top executives or other employees were arranged weeks after the attacks and took advantage of the relatively low value of company’s stock, the paper said. Normally options reflect the closing price of the share on the day it is granted, if the stock rises after the day of issue then the individual can exercise the option (buy the stock) and benefit from the premium generated.
Manipulating the option and backdating to a previous date allows the recipient to select a time when the market is clearly down, like after the Sept 11 attacks, as the date for the granting of options, maximizing the chance of a profit. The lower the exercise price, the greater the potential gain.
Among the companies being investigated are KLA-Tencor , Affiliated Computer Services , Take-Two Interactive Software , Progress Software and Corinthian Colleges , the Journal reported.