Subsequently, the Securities and Exchange Commission (SEC) took an interest, followed by the securities plaintiffs’ bar and many corporations. The practice of options backdating, apparently widespread from 1996 through 2002, is widely believed to have been short-circuited by the enactment of Sarbanes-Oxley in 2002.
Although backdating had not yet been recognized as a problem, the provisions of Sarbanes-Oxley requiring that insiders report the acquisition of securities, including options, within two days of receipt greatly hindered the ability of corporations to backdate options.
That exercise price, or strike price, usually takes one of three forms: the closing price on the day of the grant; an average of the highs and lows of the day; or the closing price from the previous day.
The lower the strike price, the greater the potential for making money when exercising the options.
The backdating problem was first highlighted by Professor Erik Lie of the University of Iowa, who published his initial study in 2004.
The case is one of the last open prosecutions arising from government or internal investigations of stock options backdating at over 200 companies, including Comverse, which was acquired in 2013 by former unit Verint Systems Inc ."It's not voluntary, it's bargained for," Garaufis said, waving a copy of Alexander's plea agreement."He came in here with this plea agreement which protects him in many ways, including his assets, from further risk.Or did a lot of CEOs just have amazingly good luck?
A stock option gives the recipient the right to purchase stock at a set price.
In addition, the company awarded thousands of stock options to fictional employees and then transferred the awards to a secret slush fund under the name I. Before he disappeared, Alexander, an Israeli citizen and a US permanent resident, transferred million to Israel, fueling speculation he may have fled there, authorities said.