updated 10:25 pm EDT, Mon July 17, 2006
Feds, SEC move on options
Federal securities regulators are getting ready to file charges in a case involving the backdating of stock options, the chairman of the Securities and Exchange Commission told MarketWatch on Monday. The news follows the announcement that the U.S. Attorney for Northern California has formed a local task force to investigate allegations that companies and individuals in the Bay Area, including Apple, retroactively changed the grant dates of stock options with the intent to defraud or mislead shareholders. Late last month, Apple's announcement that an internal investigation had discovered irregularities related to the issuance of certain stock option grants made between 1997 and 2001 led to the filing of two separate investor suits that charged company executives with defrauding the company and its investors.
Prosecutors and the SEC are probing several companies whose executives received options in company stock at low prices just before big jumps in share prices. There are both civil and criminal components to backdating options, including forging documents and lying to boards and investors. The SEC handles civil charges, while the the Justice Department as well as the San Francisco-based U.S. Attorney's Office, one of two in the country with a standalone securities fraud section, have launched their own criminal investigations.
A new study claims more than 2,000 companies appear to have used backdated stock options to boost their top executives' pay packages, according to MarketWatch.
The lawsuit claims that 18 executives and directors manipulated the option grant dates of specific stock options to maximize personal profits from the company's stock compensation plan, violating generally accepted accounting principles as well as its own stock plan approved by shareholders.
Apple's highest ranking executives and Board members were named in both lawsuits, including Apple CEO Steve Jobs, former Apple CEO Michael Spindler, former CFO and current board member Fred Anderson, iPod chief Jon Rubenstien, former CTO Avi Tevanian, current vice president of retail operations Ron Johnson, and current executive vice president and COO Tim Cook.