Criminalizing backdating: the adventure continues

As I've said, regarding backdating: "The question is where to draw the line between criminal and civil liability for these violations. Are we going to throw a significant fraction of corporate America in jail?"

No, only the honest companies, if they can extort self-incriminating information out of frightened employees (see, e.g., here), and are willing to spend millions of dollars on investigating themselves. 

As today's WSJ reports: 

With more than 130 companies under federal scrutiny, the investigation into stock-option backdating has rapidly become one of the broadest corporate scandals in decades. It is so broad, in fact, that federal authorities can't possibly do thorough examinations of every company.

Instead, they outsource a big chunk of the job. Regulators and prosecutors are relying on suspect companies to investigate themselves by hiring outside law firms. * * *

That has long been a common practice for companies in potential legal trouble, partly because it can lead to leniency as reward for a self-examination well done. But not since the overseas bribery scandal of the 1970s have so many public corporations been in trouble at the same time.* * *

The government risks focusing not on the worst offenders, critics say, but on those companies honest or frightened enough to perform scrupulous self-examinations.* * *

Critics of the approach say using private lawyers to investigate on behalf of the government can place employees in an unfair position: talk, or you'll lose your job. When speaking to private lawyers hired by the company, employees don't have the legal protections -- against self-incrimination, for instance -- that apply in some government proceedings.

* * * Mercury Interactive Corp. . . . said the cost of its internal probe amounted to about $70 million.