Tuesday, August 18, 2009
"Some companies that backdated stock options have tried to undo the practice to preserve tax deductions valued at millions of dollars. ... In the backdating scandal in 2007, companies changed the dates of stock-option grants in order to boost the potential profits that could be reaped on the options. ... Since then, some of the companies found to have backdated options have argued to the IRS that they should be able to undo the effect of the backdating. Their aim was to preserve tax deductions for options granted to chief executives and other top employees. ... The IRS rejected both proposals. 'Subsequent actions intended to retroactively reprice an option cannot change the fact that the option was issued at a discount,' the agency said in its ruling", Laura Saunders at the WSJ, 28 July 2009, link: http://online.wsj.com/article/SB124874707089185655.html.
Not only is the IRS right on this, the SEC and DOJ are wrong. Why? The companies, executives, CPAs and attorneys involved in backdating should have been indicted. Tax evasion, securities fraud, foreign corrupt practices act violations, take your pick DOJ. Multiple count indictments could be drafted. Well?