IRS joins stock options backdating task force
By Jason Bennert, Bay City News Service
September 6, 2006
SAN FRANCISCO (BCN) - Federal prosecutors announced Thursday
that the Internal Revenue Service has joined a growing investigation
into the alleged practice of some Silicon Valley companies to
backdate the stock options they offered executives and key employees.
U.S. Attorney Kevin Ryan formed a stock options backdating task
force in July to investigate the practice. Two former executives
of San Jose-based Brocade Communications have already been indicted
in connection with an alleged backdating scheme.
"We will investigate whether individuals and companies may
have deliberately backdated stock options with the intent to defraud,''
"Falsification or backdating of financial documents may
call the integrity of companies' financial statements into question,
can constitute fraud on the company, shareholders, and the market,
and may give rise to tax violations.''
Backdating is a practice whereby companies grant stock options
to executives and key employees that vest on a date prior to the
date the options were granted in order to maximize the amount
of profit received from the options. A number of prominent Silicon
Valley companies, including Apple Computer, have been linked to
alleged stock options backdating in recent months.
"With the recent discoveries of significant fraudulent misconduct
in connection with backdating of stock options, IRS-CI will work
to help ensure both the companies and executives involved in such
illegal activity are in compliance with the tax laws and where
we can assist our law enforcement partners and the U. S. Attorneys
Office in enforcing the money laundering statutes,'' IRS Criminal
Investigation Special Agent in Charge Roger Wirth said.
The backdating task force currently includes more than 13 agents
and prosecutors, according to the U.S. Attorney's office.
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