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We find that (1) the SEC shifted its mix of investigations significantly toward backdating and away from other accounting issues; (2) event studies of stock market reactions to the initial disclosure of backdating investigations shows that those reactions declined over our sample period; (3) later backdating investigations are less likely to target individuals and be accompanied by a parallel criminal investigation; (4) later investigations were more likely to be terminated or produce no monetary penalties; and (5) the magnitude of the option backdating accounting errors diminished over time relative to other accounting errors that drew SEC scrutiny.
Although we cannot directly test whether the SEC substituted toward lower-stake (but more salient) cases, the evidence presented here strongly suggests that the agency did so.
As sole lead counsel, Robbins Geller attorneys recovered more than $7.2 billion for victims of Enron.
The Enron settlement is the largest aggregate class action settlement not only in a securities class action, but in class action history.
The backdating problem was first highlighted by Professor Erik Lie of the University of Iowa, who published his initial study in 2004.