The AFL-CIO wants to know more about the role that the major accounting firms might have played in the handling of stock options grants the government is now investigating.
In letters sent last week, the labor federation -- one of the largest shareholders in public companies with more than $400 billion in assets -- asked the Big Four accounting firms to provide information on their potential involvement as outside auditors for companies now under federal investigation for possible rigging of option grants to boost their value to the recipients.
"Given the potential damage to shareholders due to options backdating, I am concerned about what role [name of accounting firm] may or may not have had in the backdating ...," wrote the AFL-CIO's secretary-treasurer, Richard Trumka, in letters to the firms' chief executives according to the Associated Press. "I urge you to describe what steps are being taken to determine [the firm's] involvement in stock option backdating where it has occurred."
Backdating options can be legal as long as the practice is disclosed to investors and properly approved by the company's board. However, the practice is illegal when performed solely to fatten executives' wallets, or structured solely to avoid taxes.
More than 100 public companies, many of them in the technology sector, are under investigation by the Securities and Exchange Commission. Both the Internal Revenue Service and Justice Department are looking into possible tax and criminal violations.
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