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Sarbanes-Oxley News & Developments
When Is Backdating a Crime?The burden will be on DoJ prosecutors to prove Brocade executives deliberately misled investors.
> > There is no statute that explicitly outlaws backdating stock-option grants, but it seems virtually impossible to backdate options and achieve the ultimate goal of putting grants "in the money" without first deliberately falsifying documents and then covering then up. At least that seems to be the conclusion reached by the Department of Justice and the SEC regarding their first case against executives charged with fraud related to backdating.
Last week the DoJ brought criminal charges against two Brocade Communications Systems executives, while the SEC filed a civil suit against the same two and the CFO. As expected, the charges focused on backdating stock options by doctoring employment documents, neglecting to record the stock-option expense, and misleading investors.
The civil suit filed by the SEC also charges securities fraud, citing specific securities-law provisions, including those having to do with books and records, internal controls, misrepresentation to auditors, and Section 302 of the Sarbanes-Oxley Act, which requires CEOs and CFOs to certify the accuracy of financial statements.
Source: CFO
Published:2006-07-31
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