The dates had been disclosed before, but only in mailed-in filings that no one ever looked at.To corporate America, the new rule was a minor hassle; to a first-year New York University finance professor named David Yermack, it was a new source of interesting data.The government obtained a conviction against Bruce Karatz, former Chief Executive Officer of KB Home, in its criminal option backdating case. The acquittals came on all charges based on option backdating claims. Criminal securities fraud charges brought by DOJ were intended by Congress to be differentiated from civil SEC charges through the added element of “willfulness.” With the increasing criminalization of the securities laws, however, the distinction between willfulness in criminal cases and scienter in civil fraud actions has all but disappeared.The verdict, however, raises more questions than it resolves. The indictment stems from option backdating issues at KB Home. Karatz used hindsight to select stock option grant dates from at least 1999 through 2005. Stated differently, little divides criminal securities fraud cases which can result in years of imprisonment from civil fraud actions where the consequences are an injunction and other remedial relief along with civil penalties.A quick call to the sales chief gave him the answer: "They got rid of the alligator living in the pond across from the model homes," says Mezger, laughing.
To identify companies that were backdating options, Forelle and the other reporters worked with academic experts to develop their own statistical-modeling system using custom-built probability algorithms designed to assess the odds that an executive’s well-timed exercise of options resulted merely from chance.
Charles Forelle ’98 and three other Wall Street Journal reporters broke the scandal of companies back-dating stock options April 19, 2007 — Journalism’s highest honor—the Pulitzer Prize—was awarded yesterday, and among the winners was Phillips Academy graduate Charles C.
Forelle ’98, a reporter for the Wall Street Journal based in the newspaper’s Boston bureau.
(Fortune Magazine) -- It is never really a shock to find executives enriching themselves at shareholders' expense.
It can sometimes be surprising, though, just how clear the evidence is, and how long it takes us to notice.