In the middle of last year, The Wall Street Journal broke a disturbing story about companies cashing in on the market decline that came after 9/11 by issuing more stock options to their executives than they would have done during comparable periods in years past.

I republished the WSJ piece and discussed its implications here.

Now, the WSJ reports that companies are admitting they issued the options after the terrorist attacks, and then backdated them. You can read the entire piece here.

Previously when the issue of options and 9/11 was raised, the companies had said it was coincidental. Their other line was that they needed to do something to keep executives motivated during a difficult period.

What's significant here is that this is the first time they have admitted backdating. And as the piece suggests, this could turn nasty and become a lawyers' picnic.

The WSJ writes:

"The post-sept. 11 backdating has caught the attention of plaintiffs' lawyers. Some of them have already mentioned it in backdating-related lawsuits or say they plan to highlight the issue. Joel H. Bernstein, an attorney at Labaton Sucharow & Rudoff LLP in New York, says that taking advantage of a national tragedy 'is an emotional issue,' but one that wil 'resonate very well with the judge and the jury.' Mr. Bernstein's firm is involved in suing executives and directors at two of the companies that issued post-Sept. 11 options grants.

"Post-Sept. 11 backdating also figured in two separate criminal cases filed last month in New York, in which a pair of former executives pleaded guilty to backdating-related offenses.

"In one case, the former top lawyer for Monster admitted he helped orchestrate a years-long backdating scheme at the New York company, operator of the Monster.com job-search Web site. In a related civil complaint, the SEC charged that the ex-lawyer, Myron Olesnyckyj, helped award employees in one division a bunch of options that were backdated to Oct. 2, 2001, when the stock hit its lowest level in nearly two years.

"That also was the day Monster announced it would have to scale back its earnings projections as a result of the terrorist attacks. Monster's then-CEO told investors that business activity had almost halted as companies "responded to help those in need" and "reflected on the tragedy." According to the SEC complaint, senior Monster executives didn't begin discussing the Oct. 2 grants until mid-October, when the company's stock was already recovering."

Some commentators, like John Carney at DealBreaker have attacked the WSJ for what they suggest is nothing more than gutter journalism.

But surely the point is that the companies are now, for the first time, admitting that they had backdated at the time. And from there, it's not hard to conclude that certain parties might have been taking advantage of a sickening national tragedy.

The other important point is that it could open the way to criminal charges and litigation.