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Apple Execs Reportedly Faked Options Documents 172

Posted by ScuttleMonkey
from the hands-in-the-cookie-jar dept.
theodp writes "Federal prosecutors are reportedly looking closely at stock option administration documents that were apparently falsified by Apple execs to maximize the profitability of option grants. While Apple has said CEO Steve Jobs did not profit from the stock-option backdating, Jobs has reportedly hired his own attorney to deal with the SEC and Justice Department."
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Apple Execs Reportedly Faked Options Documents

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  • Humbug... (Score:5, Funny)

    by markild (862998) on Wednesday December 27, 2006 @04:38PM (#17381368)
    What?? Are you saying that Steve Jobs makes more than $1 [wikipedia.org] a year?
  • by Anonymous Coward on Wednesday December 27, 2006 @04:39PM (#17381384)
    That like everything at Apple it was very easy to do. 3 clicks and options were faked. That's it!
    • by argent (18001)
      "What kind of computer produces annual reports like this?"
    • by BobNET (119675) on Wednesday December 27, 2006 @05:21PM (#17381852)
      That like everything at Apple it was very easy to do. 3 clicks and options were faked. That's it!

      Yes, but it should be pointed out that if they weren't forced to use a one-button mouse it would have only taken one click...

      • Re: (Score:2, Funny)

        by Anonymous Coward
        Yes, but it should be pointed out that if they weren't forced to use a one-button mouse it would have only taken one click...

        They would have done it in one click, but Amazon already had a patent.
    • I just want to know if Apple should now be delisted from the list of "Officially Slashdot Sanctioned Companies". It hasn't been a good year for these companies, what with Google rolling over for China, Reiser murdering his wife, and now Apple playing financial dirty tricks. :)
  • by good soldier svejk (571730) on Wednesday December 27, 2006 @04:42PM (#17381436)
    Disappointing that Fred Anderson is at the center of this. Anderson did a bang up job as CFO. He created the company's large cash reserves by liquidating unnecessary capital investments (plant), issuing a convertible debenture and selling some of their valuable ARM holdings. Then he managed the investment of those funds astutely enough to make the conversion of those outstanding notes to common stock a huge win for both the company and creditors. [macobserver.com] That 1999 conversion alone eliminated about two thirds of Apple's long term debt (conversely that means the issue had assumed most of Apple's debt). Really, this guy did an outstanding job. Apple can thank him for their sound financials.

    Now it seems the financial genius is another self-serving, crooked corporate scumbag.
    • Re: (Score:3, Interesting)

      by Bill Walker (835082)
      ...managed the investment of those funds astutely enough to make the conversion of those outstanding notes to common stock a huge win for both the company and creditors.

      Convertible bonds aren't a win for existing stockholders, however, who find their stake diluted by the new issuance. To oversimplify, it would be like the US government printing money to pay debts.

      • by node 3 (115640)
        To oversimplify, it would be like the US government printing money to pay debts.
        Which, coincidentally, is exactly what we do.

        Think about it. If the total number of dollars remained constant, a dollar today would be *more* valuable than in the past since there are now more people and more things to buy than ever before.

        Every time the fed prints more money than is destroyed, they are deliberately devaluing the money in your pocket.
        • Which, coincidentally, is exactly what we do.

          Think about it. If the total number of dollars remained constant, a dollar today would be *more* valuable than in the past since there are now more people and more things to buy than ever before.

          Every time the fed prints more money than is destroyed, they are deliberately devaluing the money in your pocket.

          "Printing money" is really a metaphor in the context of Federal debt service. The Fed doesn't literally print new money, it buys back Treasury bonds, i

      • by good soldier svejk (571730) on Wednesday December 27, 2006 @09:41PM (#17383686)
        Convertible bonds aren't a win for existing stockholders, however, who find their stake diluted by the new issuance. To oversimplify, it would be like the US government printing money to pay debts.

        They are a win for existing stockholders if the officers use the cash to help engineer a comeback which quintuples the price of the stock, as was the case at Apple. One of the things Apple did with that money was buy NeXT.
        • by oohshiny (998054)
          To oversimplify, it would be like the US government printing money to pay debts.

          Well, as far as the US is concerned, that would be a good thing because it would devalue the dollar and would make US goods and services more competitive, while at the same time reducing imports.

          It would nominally lower the US standard of living, but practically, not being able to buy Chinese-made clothes and electronics in large amounts would probably be a good thing.
      • Convertible bonds aren't a win for existing stockholders, however, who find their stake diluted by the new issuance. To oversimplify, it would be like the US government printing money to pay debts.

        Unless the issuance helps bail the company out of dire financial straits. As long as the stock goes up and provides a good rate of return, everyone's happy. It's certainly much better for the stock price than say . . . the company becoming insolvent, defaulting on crippling long term debts and/or filing for

    • Should I be worried that I can't understand a single thing you have said?
  • Lawyering up. (Score:5, Insightful)

    by GodInHell (258915) * on Wednesday December 27, 2006 @04:46PM (#17381490) Homepage

    While Apple has said CEO Steve Jobs did not profit from the stock-option backdating, Jobs has reportedly hired his own attorney to deal with the SEC and Justice Department."
    I hate it when comments like this come across as proof of wrong-doing. In buisiness I learned that you're a fool to act without the advice of a lawyer. As a law student I'm coming to understand that you're a damn fool to deal with the gov't without someone there to advise you.

    The purpose of a lawyer is to look after your interests while you conduct your business - they can warn you of impending trouble - and can nip a long drawn out investigation that will result in no arrests or charges right in the budd.

    It's stupid to blame someone for seeking protection from abuse.

    -GiH

    • by Rogerborg (306625)
      > As a law student

      OK, I will bring Captain Solo and the Wookie to you.

      • Re:Lawyering up. (Score:5, Insightful)

        by GodInHell (258915) * on Wednesday December 27, 2006 @05:07PM (#17381730) Homepage
        Yeah yeah yeah - lawyer.. evil.. tell it to the birmingham five.. or any black kid attending school in the south.. or anyone who was arrested and found not guilty due to lack of evidence.

        Oh.. right.. slashdot.. I mean *hiss* *woosh* "I have altered our arrangement" *hiss* *woosh*

        -GiH
        • Yeah yeah yeah - lawyer.. evil.. tell it to the birmingham five.. or any black kid attending school in the south.. or anyone who was arrested and found not guilty due to lack of evidence.

          This is Slashdot. Lawyers ARE inherently evil here. The gestalt view is that when you're discussing lawyers in a given situation, there is really only *one* lawyer. That's the lawyer on the wrong side of the case. The other lawyer(s), representing the right side of the case, don't exist. Technophiles apparently are just

          • by Rogerborg (306625)
            The only reason for the existence of the second lawyer in the world was the existence of the first.
    • Re: (Score:3, Insightful)

      by darkmeridian (119044)
      I agree one hundred percent with you -- who do you think works for the SEC and Justice Department if not lawyers? When a hundred government lawyers come after you, well, that's a great time to hire your own attorney.
    • Re:Lawyering up. (Score:4, Insightful)

      by toQDuj (806112) on Wednesday December 27, 2006 @05:24PM (#17381892) Homepage Journal
      In addition to hiring a lawyer for legal advice, Steve Jobs now can spend more time on what he should be doing, i.e. leading a company and preparing for the macworld keynote speech.

      Let the lawyer figure out the law stuff, and let the CEO figure out the business strategies. Taking all matters into your own hand is a grand waste of time.

      B.
    • Re: (Score:2, Insightful)

      by TobiasS (967473)

      It's stupid to blame someone for seeking protection from abuse.

      I don't think anyone is blaming for seeking protection. You, however, using the word "abuse", seem to already have determined that he did nothing wrong.

      Whether he personally profited from their accounting practices is completley irrelevant.
      He is the highest ranking corporate officer at Apple and as such has responsibilities and obligations to the shareholders and the board.

      If he violated those by backdating options for other executives and em

      • by GodInHell (258915) *

        I don't think anyone is blaming for seeking protection. You, however, using the word "abuse", seem to already have determined that he did nothing wrong.
        Point! My bad.

        -GiH
    • Re: (Score:3, Insightful)

      by dan828 (753380)

      It's stupid to blame someone for seeking protection from abuse.

      It is worth noting, however, that Jobs did recieve backdated options during this time (55 million of them), but had them cancled in 2003 when the SEC started getting serious about investigating such things. However, he was rewarded with a bunch of new, non-backdated shares worth $85 million at the same time. Face it, Jobs stood to benefit from the backdating, was fully aware that it was going on, and still got the payoff when all was said and done. Just because they pulled a CYA so that they can now cla

      • Re: (Score:2, Troll)

        by GodInHell (258915) *
        One of the points to remember in all this, is that backdating shares may not be illegal. This creates a nest of issues that are hard to untangle for the layman (I'm not even going to try to figure out if the options were forged, whether proper notice was given, and what law applies to Apple's incorporation - since it varries state to state).

        What I will say, is that it is hardly unusual for an executive to take his pay in stock options. 85 Mil. in stock [granted, more than I will ever see] is saddly in the b

    • Obviously, it is still very early, but Jobs is looking guiltier and guiltier every day. Getting an outside lawyer was probably forced upon him rather than on option for him,

      http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/ 12/28/APPLE.TMP [sfgate.com]

      ...British newspaper reported that CEO Steve Jobs received 7.5 million stock options in 2001 without getting required approval from the company's board.

      The Financial Times, citing people familiar with the matter, reported that records were later falsified to indicat

      • by GodInHell (258915) *
        Sad but true.


        I suspect we'll hear an argument that it was an innocent mistake, and that the records were altered to make it "legal."

        Oh well.. so much for innocence.

        -GiH

    • by oohshiny (998054)
      I hate it when comments like this come across as proof of wrong-doing.

      Where does it say that? No, they come across as "this matter is of sufficient concern to Jobs that he needs to hire a lawyer", nothing more and nothing less.

      As a law student I'm coming to understand that you're a damn fool to deal with the gov't without someone there to advise you.

      Maybe eventually, you'll also learn not to jump to conclusions.
  • by $RANDOMLUSER (804576) on Wednesday December 27, 2006 @04:49PM (#17381520)
    The SEC has been investigating "about 80" companies for this since July. Apple started their own internal investigation, which they're sharing with the SEC. Oh, and it's former employees who are being looked at. Oh, and maybe backdating isn't illegal, it just should be declared.

    Take a look here [com.com] or here [com.com].
    • It's still fraud if the backdating occurred, and it's no less serious just because Apple pre-empted any SEC investigations. Most criminals don't get off scot-free just because they turn themselves in when it becomes obvious that the authorities are about to arrest them.

      If the stock options were backdated are not declared, then the Apple officers receiving them were actually receiving additional compensation of the difference between the options' declared price on the backdated date, and the price on the re

      • by bar-agent (698856)

        It's still fraud if the backdating occurred, and it's no less serious just because Apple pre-empted any SEC investigations. Most criminals don't get off scot-free just because they turn themselves in when it becomes obvious that the authorities are about to arrest them.

        I don't think that is a valid analogy. With most crime, it's a simple matter to know whether you are obeying the law or not. You can turn yourself in, but everyone knows that you broke the law, and everyone knows that you know.

        But when you ge

  • by hypermanng (155858) on Wednesday December 27, 2006 @04:59PM (#17381638) Homepage
    If Jobs was aware of the problems but didn't take appropriate action it could still damage the company more than the non-story linked might imply. Essentially, Jobs has been hailed as a hero by fanboys and shareholders alike, and anything significantly tarnishing his tenure might remove some of the aura of invulnerability Apple has acquired in recent years. I don't by any means imply that Jobs' um, job is in danger, but it might complicate business partnerships and other strategic moves that Apple needs to remain competitive. iPod dominance aside, Apple's position is at least assailable, if not so tenuous as it was a decade ago. To reach its growth targets it has to navigate agreements with telecom providers like Cingular as well as convince say, Intel and Toshiba to continue to give it most-favored-nation status. Apple isn't Dell or Microsoft to expect to make demands of suppliers and partners with impunity.

    Not yet, anyway, and maybe never, if the next round of initiatives (smart phone, media ventures, etc.) collapses.

    Distracting Jobs and blemishing his heretofore immaculate turtleneck might have more consequences than just an easy story for everyone from CNET to AP report and re-report.
    • I don't think you understand. Jobs may have been aware of the back dating and back dating is not illegal. What is illegal is that the accounting people did not adjust their numbers for each quarter where the backdating occurred to reflect this action. It may be that Jobs was not aware that the backdating had not been taken into account for the quarterly statements.
  • by Anonymous Coward on Wednesday December 27, 2006 @05:18PM (#17381824)
    ... and I'm the SEC. Please get in the car.
  • by fermion (181285) on Wednesday December 27, 2006 @05:23PM (#17381884) Homepage Journal
    I know that to win, one has to play aggressively, and there is a great benefit to controlling knowledge about internal company details, which can be quite difficult to do for a publicly traded company. That said, I do hope that all companies that lied about executive compensation get nailed to the wall, even Apple. Becoming a publicly traded company is choosing to be transparent to the public. The money that comes in with a stock offering is not free. That money cannot be arbitrarily spent as it might be in a private company. I have worked in private companies and the freedom is wonderful. I have worked in public company, and the transparency is a pain in the ass. But, again, the public money does not come for free. There is a price to be paid

    The price is that executives can no longer spend company money on whatever they wish. Executives cannot arbitrarily set pay. What we have seen in the past twenty years is scam to increase executive pay while simultaneously decreasing exposure to risk, while in the truly private sector, the opposite is true. The stock option is the classic example. It is marketed as a method to align the executives interest with the stockholder interest. If the stock rises, the executive gets rewarded. In reality, just like bonuses, the behind the scene negotiations guarantees the money no matter the state of the company.

    In reality, these new breeds of corporations, with their bloated bureaucracy, with no other purpose than to create meaningless work that justifies it's existence, and raise prices and cut research to free enough money to pay for these non productive agents, are indistinguishable from any other massively bloated public entity. The similarities to congress, who wants to vote in a pay raise every year, but can't complete the minimum job requirements like passing a budget, are amazing.

  • by haggie (957598) on Wednesday December 27, 2006 @05:40PM (#17382068)
    Use one or more of the following: 1.) "We have launched our own internal investigation..." 2.) "We are cooperating with authorities..." 3.) Imply that the offending personnel have long since left the company... 4.) Imply that CEO was unaware of wrong-doing... 5.) Use the phrase "a few bad apples..." Apple can't use #5 (for obvious reasons), but they have used the other four. Sounds about as believable as Tony Snow discussing Iraq...
    • by Atzanteol (99067)

      Sounds about as believable as Tony Snow discussing Iraq...

      More like Clinton denying he had sex with an intern. I love bad partisan analogies!

    • by gnasher719 (869701) on Wednesday December 27, 2006 @06:10PM (#17382320)
      '' Use one or more of the following: 1.) "We have launched our own internal investigation..." 2.) "We are cooperating with authorities..." 3.) Imply that the offending personnel have long since left the company... 4.) Imply that CEO was unaware of wrong-doing... 5.) Use the phrase "a few bad apples..." Apple can't use #5 (for obvious reasons), but they have used the other four. Sounds about as believable as Tony Snow discussing Iraq... ''

      1) It was actually Apple who first found problems, told the SEC they had found problems, and started its own internal investigation.
      2) If a company says "we are NOT cooperating with authorities", the company has a real problem.
      3) Considering that this is about events from 1997 to 2002, it is not unusual that people leave a company in four years.
      4) Steve Jobs just made a cool 3500 million dollars by selling his share of Pixar; the whole case here is about options worth less than 17 million.
    • by evilviper (135110)
      5.) Use the phrase "a few bad apples..." Apple can't use #5 (for obvious reasons),

      Because their irony meter would explode?

  • Apple did have some rough spots during the second coming of Jobs. I doubt Jobs would have a financial care if Apple tanked because he was still successful with Pixar. But, those other execs may have lost faith in Job's vision and decided to implement plan B. I suspect they developed an immunity to reality-distortion fields due to long term exposure early on. Thus, in those uncertain days during the recession, they decided to to milk those stock options with creative accounting. Though they probably rank up

  • by nels_tomlinson (106413) on Wednesday December 27, 2006 @06:03PM (#17382274) Homepage
    . While Apple has said CEO Steve Jobs did not profit from the stock-option backdating, Jobs has reportedly hired his own attorney to deal with the SEC and Justice Department."

    This is probably a great time to remind everyone that unless you, personally, have paid your attorney's retainer, he is not your attorney. If the lawyers paid by Apple could save Apple a nickle by hanging an innocent Steve Jobs out to dry, they would be obligated to point out that fact to their client, who is not Steve Jobs.

    The moral of this is that even if your employer has paid for a lawyer, you still need your own lawyer, even if you really are as important as Steve Jobs thinks he is. Don't depend on your employer's lawyer to defend you. He'll sell you out as soon as it helps his client.

    • by ozzee (612196)

      In California at least, in most circumstances the company is required to pay your legal fees, including hiring those fees your "own" lawyer for cases where you're defending against a compaint that originated from doing your job.

    • Re: (Score:2, Informative)

      by nomadic (141991)
      The best thing to do is ask whatever lawyer you're presented with, "are you representing me or are you representing my company?". If he says both, be careful. If he says just you, you should be good. I do think in a lot of situations it's in the company's best interest to protect their employees; they're usually being the one sued, and the last thing they want is a vengeful, sold-out employee who's willing to testify against them now.
  • Jobs needs alot of lawyers, because each lawyer he has means more padding between him when he hits the concrete.
  • why this matters (Score:3, Informative)

    by MEForeman (930504) on Wednesday December 27, 2006 @09:29PM (#17383626) Journal
    before, the SEC would get mad. now the SEC has the teeth. since companies must value outstanding options which decrease company assets (and profits), and understating of value of the options is a violation of the SEC acts of 1933 and 1934. This carries real prison time and real fines. If they're convicted it's a felony and they can't serve as an Executive officer or on the board of any SEC-reporting company. AKA they get fired. kinda sweet, i think. and you can thank worldcom for this one. this is a big thing they did.
  • And I do not own any stock so I do not care. OTOH the company I work for is a bunch of slick theives who are doing this too - except with armies of in-house counsel covering their tracks as the rest of us peons get stuck with a poker. I guess when they get caught I'll be cheering.
  • UPDATE: The Financial Times is now reporting that Apple 'falsified' files on CEO Steve Jobs' options [ft.com] to show that a full board meeting had taken place to approve 7.5m stock options that were handed to Jobs in 2001 without the required authorisation from the company's board of directors.

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