Option backdating example
The benefit to the options holder is the difference between the strike price and the later sales price.
Corporate Fraud remains the highest priority of the Financial Crimes Section and the FBI is committed to dealing with the significant crime problem.These are the identified priority crime problem areas of the Financial Crimes Section (FCS) of the FBI.The mission of the FCS is to oversee the investigation of financial fraud and to facilitate the forfeiture of assets from those engaging in federal crimes.The FBI has formed partnerships with numerous agencies to capitalize on their expertise in specific areas such as Securities, Tax, Pensions, Energy, and Commodities. As reflected in the statistical accomplishments of the Presidential Corporate Fraud Task Force (founded 2002), which includes the above-mentioned agencies, the cooperative and multi-agency investigative approach has resulted in highly successful prosecutions.The FBI has placed greater emphasis on investigating allegations of these frauds by working closely with the SEC, National Association of Securities Dealers (NASD) Regulation, Internal Revenue Service (IRS), Department of Labor, Federal Energy Regulatory Commission, Commodity Futures Trading Commission (CFTC) and U. The FBI has also worked with numerous organizations in the private industry to increase public awareness about combating Corporate Fraud, to include: Public Company Accounting Oversight Board, American Institute of Certified Public Accountants and the North American Securities Administrator’s Association, Inc.Backdating stock options inflates their value to the holder at the expense of regular shareholders.
Some corporate executives have also changed their stock option exercise date (the date the option can be converted to stock) to avoid paying income tax.
As of the end of Fiscal Year (FY) 2006, 490 Corporate Fraud cases are being pursued by FBI field offices throughout the U.
S., 19 of which involve losses to public investors that individually exceed $1 billion.(1) Falsification of financial information, including:(a) False accounting entries(b) Bogus trades designed to inflate profit or hide losses(c) False transactions designed to evade regulatory oversight(2) Self-dealing by corporate insiders, including:(a) Insider trading(b) Kickbacks(c) Backdating of executive stock options(d) Misuse of corporate property for personal gain (e) Individual tax violations related to self-dealing(3) Fraud in connection with an otherwise legitimately-operated mutual or hedge fund:(a) Late trading(b) Certain market timing schemes(c) Falsification of net asset values(d) Other fraudulent or abusive trading practices by, within, or involving a mutual or hedge fund(4) Obstruction of justice designed to conceal any of the above-noted types of criminal conduct, particularly when the obstruction impedes the inquiries of the Securities and Exchange Commission (SEC), other regulatory agencies, and/or law enforcement agencies.
These organizations have been able to provide referrals for expert witnesses and other technical assistance regarding accounting and securities issues.
In addition, the Financial Crimes Enforcement Network (Fin CEN) and Dunn & Bradstreet have been able to provide significant background information on subject individuals or subject companies in an investigation.
The FBI investigates matters relating to fraud, theft, or embezzlement occurring within or against the national and international financial community.