Jobs, Apple directors face new backdating suit

Apple CEO Steve Jobs addresses the crowd at WWDC 2008.

(Credit: James Martin/CNET News.com)

Current and former members of Apple, including CEO Steve Jobs and several directors, have been sued again over their role in the company's stock options-backdating affair.

The latest case, filed in federal court in San Jose last Friday, was put on record Monday. Martin Vogel and Kenneth Mahoney, the plaintiffs, are charging several executives and directors of Apple with securities fraud for failing to disclose the company's practice of backdating certain stock option grants in the early part of this decade.

Apple has admitted that the company backdated certain option grants, including two awarded to Jobs, in order to take advantage of more favorable exercise prices for those grants. This practice isn't illegal, so long as it's disclosed, but dozens of companies failed to do so in the early part of this decade, and some people have gone to jail for it.

Federal and state authorities have thus far declined to prosecute Jobs, or any current members of Apple, after an internal investigation cleared the CEO, but the Securities and Exchange Commission has filed a lawsuit against Nancy Heinen, Apple's former general counsel, for allegedly covering up the backdating.

This isn't the first shareholder suit to be filed; a similar suit has faced challenges getting off the ground because it's very difficult for shareholders to prove that they were harmed by this practice.

According to InformationWeek, Vogel and Mahoney claim that the disclosure chopped $7 billion worth of shareholder value from Apple's stock in the two weeks following the June 2006 disclosure that the company had discovered backdating in its past. Their problem, however, is that Apple's stock has basically tripled since then, as the company has continued to sell gobs of Macs, iPods, and, more recently, iPhones.

[robvme]

Just shows how litigous this country is. Whenever a company is successful you can count on some lawyer trying to get a piece of the action. I am not an Apple fan, don't own anything Apple, but recognize this American success story. Why do we insist on cannibalizing our own in this country? Boils down to wanting something for nothing. Lawyers are the most parasitic of them all. Afterall, don't they lobby, create, draft, and push thru the laws? I guess they know best.

[Perry_Clease]

"Apple has admitted that the company backdated certain option grants... This practice isn't illegal, so long as it's disclosed...Federal and state authorities have thus far declined to prosecute Jobs, or any current members of Apple, after an internal investigation cleared the CEO, but the Securities and Exchange Commission has filed a lawsuit against Nancy Heinen, Apple's former general counsel, for allegedly covering up the backdating... it's very difficult for shareholders to prove that they were harmed by this practice...Their problem, however, is that Apple's stock has basically tripled since then, as the company has continued to sell gobs of Macs, iPods, and, more recently, iPhones."

[amarkj]

If this was a Microsoft story you would see 10 comments about how evil they are haha.

[BlackMicro]

Your right! Microsoft is evil. haha

[BlackMicro]

Now that I've said about a Apple story do you feel better?

[Penguinisto]

Actually, no - stock options backdating is legal (as mentioned above), and doesn't affect the consumer. Evil is only counted when a corp harms the customer.

[humanssssss]

I'm glad someone is suing Apple. In addition, Steve Jobs should go to jail for stock options backdating both at Pixar and at Apple. He has a history of doing this and should go to jail.

[pilaa]

Just how the heck do you know?

[humanssssss]

If Apple lost $7B in the week follow the backdating news during two weeks. That's the actual damage when Apple investors sold their stocks and loss quite a bit. Even if Apple increases 3 fold since, the investors that lost their money lost it then and continue to not invest in Apple. There's a net loss.

[Penguinisto]

the investors who were stupid enough to sell only harmed themselves. those who held will likely reap far more out of the deal.

[mailbox001]

Microsoft paid for their crimes of heavy handed business tactics, how come Jobs gets a free ride from his Crimes. He's more corrupt then Gates and Ballmer combined!!!

[j_a_s_p_e_r]

What about CNet's own stock option backdating scandal. Maybe *thats* the reason for the kit-glove handling of this news. Option backdating is in many cases simply fraud, saying that it is not illegal as long as it is not disclosed oversimplifies the underlying problem of this practice.

[konok1973]

I just don't understand!
"Vogel and Mahoney claim that the disclosure chopped $7 billion worth of shareholder value from Apple's stock"
With this, they just make more harm, than good and they saying they doing this for the shareholders.
Somebody should sue them, because they push done the share price with this!

[retrojet]

This is amazing...it's makes no sense! Backdating is not illegal!!!! We went through this 2 years ago. Let's get this straight...these idiots are suing because when it was announced that they backdated, they lost some value and they sold their stock. Well, friends, if you can't stand to lose money, stay out of the stock market! If they were doing something illegal, then that's a problem. But the SEC already cleared them. But then again, why not sue? The upside for the lawyers is huge, but they only have to spend comparatively little money to prosecute the suit. Apple's lawyers will be busy, so the system feeds itself and basically keeps the lawyers in business.

[j_a_s_p_e_r]

Option backdating is noting more than a dirty trick, and often illegal. It screws the small investor.

[just_a_reader]

Apparently it's only illegal if someone doesn't like you; if the price collaps; or the company isn't cool. My question is why the backdating in the first place? What did that accomplish (except to put more money into someone's pocket)? They should just increase the next set of options they give, not due favors. Can I, as stock holder have my issues backed dated to take advantage of the price?

[Kwasiowusu]

@ "retrojet", I want some of what you are smoking dude!
Deliberately backdating stock options to a point where the stock price was lowest, so that company executives can illegally double/triple their returns IS of course VERY illegal. Whoever is responsible should be in jail the same way Enron executices were put in jail. If Steve Jobs is resposnsible, he shold be charged by thye SEC, found guilty and had his butt dragged into jail.
The funny thing about the Apple/Steve Jobs cultists/fanatics is, while they keep screaming every day for the goverment to go after Microsoft, they are the same insist that Apple/Jobs be allowed to get away with clearly breaking the law, because their "God" Steve Jobs should be above the law. Give me a break!

[blabtech]

when companies grow, there's always problems like this going on... it seems to be nowadays

http://blabtech.blogspot.com

[Orion Blastar]

Apple is the new Enron. I told people this would happen again.