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Charitable Donations The Next Backdating Scandal

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by Felix Salmon
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Feb 25 2008 12:00am EDT

Charitable Donations: The Next Backdating Scandal?

Are CEOs backdating charitable stock donations? They might well be, according to Zubin Jelveh, who has been talking to NYU professor David Yermack:

Yermack estimates that while most of the 90 chief executives and chairmen in his sample are playing by the rules, about 20 percent may be trying to game the system.

CEOs would benefit if they donated their stock at an artificially high price, because the higher the stock price the more of a tax write-off they get. As a result, there's an incentive for them either to use inside information to sell before the stock tanks, or else to backdate their donations to when the stock was at its peak. I'd love to look at the stock-by-stock data, and see which donations were coincidentally made right when the stock price hit its all-time high.

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