Backdated Stock Option Indictments

As discussed here, we should be cleaning our own house. This story and permutations of it are not going away. There will be more stories like this:

2 Are Charged in Criminal Case on Stock Options
By Damon Darlin and Eric Dash

SAN FRANCISCO, July 20 — Federal prosecutors on Thursday filed the first criminal charges against executives in a mushrooming investigation into the possible manipulation of stock options.

Gregory L. Reyes, the chief executive of Brocade Communications until January 2005, and Stephanie Jensen, the vice president for human resources until 2004, were each charged in a criminal complaint with one count of securities fraud. Prosecutors said the two doctored the minutes of board meetings, job-offer letters and other documents to make it appear that employees were granted stock options at an earlier date, when the share price of Brocade was lower.

The Securities and Exchange Commission also filed a civil complaint, which named Brocade’s former chief financial officer, Antonio Canova, as well as the other two executives. (Mr. Canova, who resigned in December 2005, was not named in the criminal case.)

The criminal complaint is the most significant step yet by investigators in what is shaping up to be a large-scale scandal in the corporate world. Corporations — from small technology companies like Altera and Mercury Interactive to industry giants like UnitedHealth — have been ensnared in investigations into whether their executives or boards improperly granted stock options at attractive prices.

Now that prosecutors in San Francisco have fired the first volley, many lawyers said they expected a flurry of indictments to follow.

“I think we’re going to see a quick succession of cases,” said Scott S. Balber, a lawyer with Chadbourne & Parke who would not say whether any of his corporate clients had been contacted by regulators regarding the backdating of options.

I can't wait to hear the howls of outrage when more draconian regulations come. When we won't police ourselves effectively, we invite outside political forces to do it for us. That would require focusing on more than just quarterly earnings. Can we walk and chew gum simultaneously?