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University of Iowa News Release

Sept. 1, 2006

Lie To Testify About Backdating Before U.S. Senate Committee

Erik Lie, associate professor of finance in the University of Iowa's Tippie College of Business, will testify before a U.S. Senate committee next week about his research that uncovered the growing scandal of stock options backdating.

Lie will appear before the U.S. Senate's Banking, Housing and Urban Affairs Committee on Wednesday, Sept. 6. The committee meeting begins at 9 a.m. Central time. Others scheduled to testify with Lie at the hearing include Christopher Cox, chairman of the Securities and Exchange Commission (SEC): Mark W. Olson, chairman of the Public Company Accounting Board; Lynn Turner, former chief accountant of the SEC; and Kurt Schact, managing director, Centre for Financial Market Integrity, Chartered Financial Analyst Institute.

The committee is seeking additional information from Lie, whose research suggests that companies may have backdated stock-option grant dates to enrich their senior executives. The study has come to the attention of numerous prosecutors and federal regulators and has led to a growing options scandal. As a result, numerous companies have restated earnings, executives have resigned and numerous companies are being investigated by the Justice Department, the SEC, or both.

By his most recent count, Lie said more than 2,000 companies may have engaged in the illegal options dating. The companies backdate their options by recording the date the options were granted to a date before the options actually were granted, when the share price of the stock was lower. As a result, if the stock price increases, the option becomes more valuable. However, such backdating could be considered fraudulent and violate securities laws and lead to tax and accounting difficulties.

The Senate Banking, Housing and Urban Affairs committee has jurisdiction over, among other areas, the nation's financial institutions and publicly traded companies. The committee is chaired by Sen. Richard Shelby (R-Ala.) and its ranking member is Sen. Paul Sarbanes (D-Md.).


For more information on Erik Lie, including a link to his research on stock options backdating:

For more information on the U.S. Senate Committee on Banking, Housing and Urban Affairs:

STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Suite 371, Iowa City, Iowa 52242-2500.

MEDIA CONTACT: Tom Snee, 319-384-0010,