Exercise Backdating

Yesterday, you went to the gym for the first time in three months. You did four pushups and jogged for six minutes. Then, you retreated to the locker room, sweating and gasping for breath, your muscles starting to seize up like those marathon runners who end up pooping themselves at the finish line.

But you tell your friends you have been going to the gym daily for the last few weeks and will definitely be ready for the charity 5K they want to run this weekend. That's one form of exercise backdating.

Another version involves finance.

Basically, it's a way for corporate insiders to game stock options to get themselves the highest possible profit. Executives will (illegally) issue a stock option for a date that has an advantageous market price.

Shares of Frontage Prunes Inc. are trading at $7 on December 1. By December 15, the stock has risen to $10 a share. On that day, executives decide to give themselves their Christmas bonus in stock options. But they backdate the option to December 1. By fudging the date, the options are exercised at $7 a share. The executives can then immediately turn around and sell the shares at $10, pocketing $3 per share in the transaction.