Some hedge funds thought they had found a way to profit from the options backdating scandal. Recall that Sarbanes-Oxley requires every Form 10-Q and 10-K to be signed by senior executives, who thus certify the accuracy of the results and the adequacy of the financial controls. In the wake of the options scandals, many senior executives were unable or unwilling to sign off, resulting in some well-publicized reporting delays.

Enter some wily hedge funds that, according to Law.com, built up positions in these companies' bonds and had them declared in default, seeking to have the bonds immediately paid off. That would allow the bond holders to make a quick profit in several ways, consent fees among them. The 8th U.S. Circuit Court of Appeals, however, just ruled that a delayed filing does not permit bondholders to accelerate repayment. We'll see where this goes.

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