The companies were awarding the options later but then marking the awards to earlier dates, when the stock's price was low.The reason for doing this was simple: stock options priced at or above where the stock is trading (aka, "out of the money" options) get favorable tax treatment compared to stock awards priced below the market price (aka, "in the money" options).
In a September 9, 2011 opinion applying Maryland law, Southern District of New York Judge Naomi Reice Buchwald ruled in a coverage action brought by Safe Net’s excess D&O insurer that, among many …
Continue Reading Although some noteworthy settlements from the subprime-related securities class action litigation wave have started to accumulate (refer for example here), there are still some impressive settlements coming in from the prior scandal.
According to a study by Erik Lie, a finance professor at the University of Iowa, more than 2,000 companies used options backdating in some form to reward their senior executives between 19.
The SEC’s opinions regarding backdating and fraud were primarily due to the various tax rules that apply when issuing “in the money” stock options vs.
United Health Group is one of many companies that became the target of investigations by federal prosecutors and the U. Securities and Exchange Commission over alleged stock options backdating. Financial Services Law360 UK and Insurance Law360 UK provide breaking news and in-depth analysis on U. and European Union regulation, enforcement, legislation, and litigation involving banks, investment firms, insurers, and more.
It was the pseudo-scandal launched by the Wall Street Journal's investigative unit, after its reporters began following up on an academic report that demonstrated many executive stock options awards were too well-timed to be plausible.By materially misstating these expenses for over a decade, United Health breached its duty to shareholders to accurately report its financial results.” According to the Commission’s complaint, certain United Health officers used hindsight to pick advantageous grant dates for the company’s nonqualified stock options that on many occasions coincided with, or were close to, dates of historically low annual and quarterly closing prices for United Health’s common stock.Although pricing the options below current prices required the company to report a compensation expense under well-settled accounting principles, United Health avoided reporting the charges by creating inaccurate and misleading documents indicating that the options had been granted on the earlier date.Lubben with participating in the stock option backdating scheme.Without admitting or denying the allegations, Lubben consented to, among other things, an antifraud injunction, a 5,000 penalty, and a five-year officer and director bar.But it all became worse than a pseudo-scandal, in fact.