The legal complaint alleged that from 1993 to 2006, the former CEO and the former chief accounting officer directed the company to engage in schemes to provide undisclosed compensation to executives and certain employees. Lin was accused of backdating stock option documents in order to give the appearance that options were granted on earlier dates than issued.This scheme was allegedly used to the benefit of officers and employees of the company as well as its directors.It is common for two parties, particularly in the commercial context, to enter into a contract at one time, but agree to have the contract come into effect at an earlier time. Courts respect the parties' decision to backdate since giving effect to backdating provisions respects the parties' intentions as well as their freedom of contract., 1968 (the date the contract was delivered to the insured).The Court considered the construction of the whole policy and held that the exclusion clause took effect on the backdated date chosen by the parties.This is the granted option that would be reported to the SEC.The act of options backdating became much more difficult after companies were required to report the granting of options to the SEC within two business days.
For example, the SEC filed a civil lawsuit in 2010 against Trident Microsystems and two former senior executives from the company for stock option backdating violations.This included options backdating presented in offer letters to new hires.Annual and quarterly reports filed by the company did not include the compensation costs that stemmed from the options backdating incidents.In addition to misleading a third party, backdating may also be impermissible where it contravenes applicable rules or legislation.For example, in the Ontario Securities Commission found that RIM engaged in improper backdating practices when certain high ranked individuals backdated options to a price that was "in the money".
Companies would simply wait for a period in which the company's stock price fell to a low and then moved higher within a two-month period.