Securities: Backdating Penalties Progressing Slowly

An investigation into the backdating of stock options at more than 100 companies thus far has seen few enforcement actions. The lawyers and executives at the companies being investigated have been waiting to see how investigations by the Securities and Exchange Commission and general attorneys will go. "An enormous market constituency is waiting to see how the government is going to assess these things," said William R. Lucas. Lucas is the co-chairman of the securities practice at Wilmer Hale; Wilmer Hale currently is investigating backdating at UnitedHealth.

The Slow Pace of Justice on Options Backdating

Brocade Communications is one of the companies currently being watched most closely by those interested in the backdating scandal. Brocade was one of the first companies that the government began to look into after backdating became a recognized phenomena. The company restated their earnings from 1999 to 2004. SEC commissioners are said to be divided over penalties for backdating, although SEC chairman Christopher Cox recently said that there was no conflict within the SEC about backdating penalties. While backdating is not necessarily against the law, it can lead to serious accounting, disclosure and tax issues.