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Shanahans plead not guilty to securities fraud

By AP/KWMU

St. Louis, Mo. – Businessmen Mike Shanahan Senior and Junior pleaded not guilty on Monday to charges they illegally backdated stock options at their company, Engineered Support Systems.

They're accused of a scheme that prosecutors say enriched executives and board members by nearly $20 million between 1996 and 2002. Shanahan, Sr. was CEO at Engineered; his son, 40, was on the board. The elder Shanahan, 67, also used to own the Blues hockey team.

The company supplies military support and equipment and was sold last year to DRS Technologies Inc.

Also charged is Gary Gerhardt, a former chief financial officer at Engineered Support. Assistant U.S. Attorney Michael Reap has said the men were able to retroactively pick dates for stock options that coincided with low points in the company's stock price. That allowed them to make greater profits when they exercised the options, according to the indictment.

Attorneys for Gerhardt, who first was charged in March, have said auditors for the company knew of the stock trading practices and that it was not considered illegal.

Attorneys for the Shanahans previously have said they will use a defense similar to that of Gerhardt.

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