updated 02:25 pm EST, Thu November 15, 2007
AAPL shareholder suit axed
A shareholder lawsuit against Apple seeking damages as a result of the Cupertino-based company's recent stock options scandal was dismissed in a San Jose District court yesterday. The suit, which charged that Apple's CEO Steve Jobs and other executives were overpaid via illegally backdated stock option grants, was thrown out because Apple's stock price did not drop after the backdating was revealed, according to Bloomberg.
"While the subsequent disclosure that the options were backdated might require a restatement, without a discernible drop in the stock price there is no basis upon which to establish an injury to shareholders," said U.S. District Judge Jeremy Fogel.
The lead plaintiff in the case -- The New York City Employees' Retirement System -- said the illegal awards caused Apple's stock to dilute by issuing more than 200 million shares that were not disclosed or accounted for.
Apple conducted its own internal investigation into "Stock option irregularities" after the company discovered suspicious accounting records, which eventually led to an $84 million correction that cleared chief executive officer Steve Jobs of any wrongdoing.
Fogel dismissed the suit but is allowing shareholders to refile the claims as a derivative suit, which alleges that the violations hurt the company itself. The order states that the case would likely fold into an existing derivative claim made by the U.S. Securities and Exchange Commission against Apple's former General Counsel, Nancy Heinen.
Heinen left the company without warning and sought legal aid shortly after her departure. Apple's former CFO Fred Anderson was also implicated, but settled with the SEC in April for a fine of $150,000 alongside repayment of roughly $3.5 million in realized gains from backdated options.