Did CEOs Time Charitable Donations Too?
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The muckracking professor whose research lead to the whole stock option backdating scandal (albeit, a decade later) is back at it again. Apparently, he’s now looking to see whether insiders backdated stock donations to their charitable foundations to “maximize tax benefits”.
As Portfolio points out, there are two ways that insiders could get this lucky: one legal and one not. The legal way is that donations to family foundations are exempt from insider trading rules as the stock isn’t really being sold. The stock could be donated the day before an earnings announcement reporting a big drop in earnings and the executive would get the higher value of the stock as a tax writeoff.
The not so legal way is to backdate the donation to a high point in the stock during the period in which insider donations have to be reported, which is much longer than the time to report sales. This would take some collusion between the foundation and the executive, but most foundations are run by either the executive or his family, so it is not exactly difficult to pull this off.
The professor did not find definitive proof of backdating, but the longer the time between the donation and the report of the donation, the better timed the donation seemed to be. He estimated that, at most, 20% of the donations seemed suspicious.
All this for people that are already wealthy beyond belief. It’s amazing what people will do for money. As King Solomon reminds us “Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income“. It doesn’t seem to matter to some people what they have to do to gain wealth they could never possibly spend, whether it’s cheating investors or the IRS.
Hopefully, this will lead to convictions. Unchecked greed will only lead us down a dark and dangerous path and we seem to be stuck in the eternal downward spiral that Gordon Gekko thrived on.