Apple CEO Steve Jobs maintained that he was unaware of the accounting implications of stock-option backdating during his deposition last year with the Securities and Exchange Commission, according to a transcript of the interview.
Forbes managed to obtain the document after a Freedom of Information Act ruling in its favor, and has published a story examining the transcript. Apple and Jobs were the subject of an investigation after the company determined that two stock-option awards given to Jobs and other Apple executives were improperly backdated, and that minutes of a meeting were falsified by Nancy Heinen, Apple's general counsel at the time.
No action was ever taken against Jobs or Apple, but Heinen and former Apple CFO Fred Anderson settled cases brought by the SEC concerning their involvement in the options backdating scandal. SEC investigators interviewed Jobs in March 2008 as part of their case against Heinen.
In the deposition, Jobs testified that he requested the 2001 grant later found to be improperly backdated because he was feeling underappreciated by Apple's board of directors. Jobs has only taken $1 in salary a year since his return to Apple and, with the dot-com bust having eroded the value of his stock options, felt he was not being properly compensated for his work at Apple as measured against his peers.
There was a delay between the first proposal of a grant of 7.5 million shares in August 2001 and the final approval of that grant in December, due to haggling between Jobs and the board over the terms of the award. That's when minutes of a fictitious board meeting in October were created by Heinen--according to the SEC--to backdate the option's grant date to a time when Apple's stock price was lower than it was in December. Jobs swore in the deposition that he was unaware of the falsified records.
Jobs also reiterated that he was unaware of the accounting implications of stock-option backdating. It's not illegal to backdate options so long as a company discloses that action and adjusts its books accordingly, but Apple and dozens of Silicon Valley companies over the last eight years did not take that extra step.
In 2007, Anderson claimed that he had informed Jobs of the accounting implications of option backdating, but Apple and Jobs have long maintained that he did not understand the details of such matters.
Apple executives have settled a shareholder lawsuit filed over its stock-option backdating practices for $14 million.
The executives themselves, including CEO Steve Jobs, won't actually have to cough up the cash: that's why they have insurance, according to the Associated Press. And the money actually goes to the corporation, not the shareholders themselves, because this was a "derivative" lawsuit that sought compensation on behalf of the company. Attempts by shareholders to sue on their own behalf have been stymied by the fact that Apple's stock has actually risen since the backdating was revealed in late 2006.
Unless anything else surfaces, this is probably the end of Apple's stock-option troubles, which forced the company to take an $84 million charge in 2006 to properly account for stock option awards that were given to executives with cherry-picked grant dates. No one from Apple's current management team has been charged, and Securities and Exchange Commission cases against former executives Fred Anderson and Nancy Heinen have been settled.
Former Apple general counsel Nancy Heinen has settled with the SEC over charges that she improperly backdated stock options at the company.
The SEC filed a lawsuit against Heinen last year charging her with cherry-picking grant dates for stock option awards to Apple executives--including CEO Steve Jobs--and falsifying paperwork in order to cover up the selection of the favorable dates. Stock option backdating is legal if properly disclosed, but dozens of companies--including CNET Networks--in the earlier part of this decade failed to do so, and executives at other companies have gone to prison as a result.
Heinen will pay $2.2 million in penalties and fines to settle the case, without having to admit or deny any guilt in the case, according to Reuters. Her attorney issued a statement following the release of the settlement: "I cherish the great people I worked with at Apple, and I am proud of my contributions to its historic turnaround and current success. With this lawsuit behind me, I look forward to addressing the greater challenges of social justice and economic disparity."
Apple conducted an internal investigation into stock option backdating at the company in 2006. While it admitted the practice occurred, the company cleared all current executives of the company, including Jobs, of any wrongdoing. Former CFO Fred Anderson was also sued by the SEC along with Heinen but he settled his case the same day it was filed.
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.
Apple faces a new lawsuit filed by shareholders angry over its stock option backdating practices.
Several shareholder suits have already been filed, but the latest one comes from the Boston Retirement Board, according to Andrews Publications over at Findlaw. This group claims to have "confidential information" regarding Apple's stock option backdating obtained through an inquiry via the Santa Clara County Superior Court, according to the article. However, it says it can't publish that information until a judge rules on how to treat the sensitive documents.
Apple acknowledged in late 2006 after an internal investigation that certain stock option grants, including one to CEO Steve Jobs, were improperly backdated to use a more favorable price when setting the options in order to make them more valuable. The company has maintained that while Jobs was aware that the options were backdated, he was not aware of the accounting implications of the practice. Backdating stock options is fine as long as you disclose the practice at the time, which Apple and dozens of other companies--including CNET Networks, publisher of News.com--in the early part of this decade did not do.
The suit, filed last week, charges that executives and directors harmed shareholders by failing to detect and prevent the backdating. A similar suit by the New York City Employees Retirement System was thrown out in November, but others are pending.
New Apple General Counsel Daniel Cooperman won his first battle on behalf of his new company yesterday, successfully convincing a judge to dismiss a shareholder lawsuit over Apple's stock-options backdating mess.
The New York City Employees Retirement System had sued Apple claiming that the company's practice of backdating stock options diluted the value of the stock. Apple has admitted that it improperly backdated stock options on several occasions, including two awards to CEO Steve Jobs, and last December it took a $84 million charge to account for the options.
But the suit had to show that Apple shareholders lost money in order to recover damanges, and the judge apparently took one look at Apple's stock performance over the last year and said, "Sorry." Bloomberg reported that the judge said he couldn't establish a value for the injury suffered by shareholders without a drop in the stock price, and Apple's stock price has almost doubled in the last year.
The decision does allow the plaintiffs to try again and claim that the backdating hurt the company in general, if it didn't hurt shareholder value, but they'll have to get in line with other plaintiffs claiming the same thing. Other legal actions over the backdating scandal are also occupying Cooperman's time, perhaps most notably the Securities and Exchange Commission's suit against Nancy Heinen for which Jobs has reportedly been subpoenaed.
- prev
- 1
- next
