Apple Stock Options Scandal, Feds Begin Investigation
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Written By Kate Zimmermann | October 6, 2006 | Share This
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Apple has released the findings from its comprehensive investigation into the irregular backdating of employee stock options. The voluntary three-month examination dug into more than 650,000 employee emails and documents, and conducted over 40 interviews with employees, directors and advisors. In the end, they uncovered 15 cases of mis-reported backdating, the most recent of which occurred in January 2002.
The activities of two unnamed former officers “raised serious concerns”, but none of the current management team was reportedly involved. Nevertheless, former CFO Fred Anderson resigned yesterday from the board of directors, “in the best interest of the company.” CEO Steve Jobs publicly admitted to being aware “that favorable grant dates had been selected”, adding however, that he neither benefited from them nor understood the accounting implications. He issued a public apology to shareholders yesterday, calling the events, “completely out of character for Apple.”
Despite Jobs’ admission, Wall Street did not seem phased by the announcement. Apple’s stock dropped $ 0.58, and has otherwise remained stable.
The vagueness of Apple’s press release suggests that there’s more to the story that may be uncovered in upcoming weeks. The Times Online suggests that criminal charges may be brought against the unnamed officers. The Motley Fool rips into Jobs’ alleged ignorance, calling Apple’s report “another flimsy exercise in self-serving corporate-speak.” He points to the recent Comverse Technologies scandal, in which backdated stock options were used to lure and hold onto executives. (Granted, Comverse’s ex-CEO was recently apprehended for trying to flee to Namibia with $60 Million from a secret account in Israel, so it may be a BIT of a harsh example.) Forbes also questions the validity of Jobs’ excuse, and speculates that his ignorance plea would not hold up in court. Regardless, says Forbes, without more information it’s difficult to prove any intent to commit fraud and it’s therefore unlikely that Jobs would be dismissed as a result of the scandal.
Though Apple has complied fully with the SEC, federal prosecutors are rumored to have begun an investigation.
Topics: Legal Issues |