updated 01:20 pm EST, Fri January 12, 2007
SEC investigates Jobs
Federal officials are actively investigating a backdated stock option grant that carried a false October 2001 date which was awarded to Apple CEO Steve Jobs, according to the Wall Street Journal. Investigators are focusing on the grant to Jobs for 7.5 million options which finalized in December of 2001, which resulted in a retroactive $20 million charge to Apple's earnings due to false dating that increased the value of the options. The false documentation was created by former Apple attorney Wendy Howell, who the company quietly dismissed last month, according to the report. Howell claims that Apple's former general counsel and head legal official Nancy Heinen, who left the company in early May of 2006 and later sought legal counsel, instructed her to create the false documentation. Howell's attorney, Thomas Carlucci, said that "Ms. Howell acted as instructed by Apple management and with the company's best interest being paramount" while working for the Cupertino-based company.
Christina C. Arguedas -- Heinen's attorney -- claims she did not knowingly engage in any wrongdoing, and aptly denies that Heinen instructed Howell to falsify the documentation. "Each of the option grants involving Ms. Heinen was authorized and approved by her superiors," Arguedas said.
SEC investigators are working with federal prosecutors in an effort to question Howell and Heinen, both of whom have refused questioning thus far. Investigators also wish to speak with former Apple CFO Fred Anderson, who resigned from Apple's board of directors in October after an Apple-ordered independent investigation "raised serioius concerns" regarding the actions of two former officers in connection with the accounting.
An attorney representing Anderson said that "As CFO, Fred did not play any day-to-day role in the granting, reporting and accounting of stock options and he was not involved in any knowing manipulation of the process."
While a decision on whether investigators will bring criminal charges in Apple's case isn't expected for some months, the ongoing stock options scandal has directly affected the company's share price as new reports surface, bringing additional details to light regarding current as well as former management. Shareholders worry that any implication of company CEO Steve Jobs -- who is held in high regard and is largely credited for the firm's explosive success since his return to the company in 1997 -- could force the executive to step down, ultimately likely resulting in a major deflation of Apple's share price. Apple, however, contests that its independent investigation cleared all current management of any wrongdoing.
The company hired an independent counsel headed by a formal federal prosecutor shortly after it discovered "irregularities" in past stock option grants during a management review. The report resulting from that investigation -- which looked at the better part of a million documents over a period of several months -- found no misconduct by current management.
Despite such findings, Jobs elected to hire outside legal help late last year, leading many industry analysts to wonder why Apple's chief waited so long to seek legal help, considering the executive's stature and position at the company. Apple's stock fell following the initial report from The Recorder revealing Jobs' decision to seek legal aid, but promptly rebounded after several industry analysts reassured investors that the CEO is very likely not at risk of implication from the stock options investigation.