updated 03:05 pm EDT, Thu August 14, 2008
Heinen settles with SEC
The Securities and Exchange Commission has announced a settlement in the backdating allegations against Apple's former general counsel, Nancy Heinen. Heinen is the central figure in the backdating scandal that saw Apple accused of improper options payouts which led to numerous lawsuits from shareholders and has seen Apple CEO Steve Jobs subpoenaed to testify in court about the backdating. Heinen has agreed to pay $2.2 million in disgorgement, interest and penalties, and will also be barred from serving as an officer or director of any public company for five years. She has also been suspended from appearing or practicing as an attorney before the SEC for three years, but has not had to admit or deny the Commission's allegations.
The settlement is the result of an SEC complaint filed in April 2007, claiming Heinen was responsible for Apple fraudulently backdating two large options grants to senior executives, including CEO Steve Jobs. The complaint also alleged that Heinen altered Apple records to conceal the fraud.
The new settlement follows ex-Apple CFO Fred Anderson's settlement for $3.5 million in April. Anderson's settlement also excluded an admission of guilt.
The first of two backdating instances involved 4.8 million options distributed to six members of the executive team -- Heinen included -- in February 2001. The SEC alleges that Heinen set the options to backdate to January 17th, 2001, when Apple's share price was much lower. Heinen is also alleged to have directed her staff to prepare documents falsely indicating that Apple's board had approved the executive team grant on January 17th. As a result, Apple failed to record approximately $18.9 million in compensation expenses associated with the option grant.
The second instance involved a December 2001 grant of 7.5 million options to Jobs. Heinen again had options backdated, this time to October 19th, 2001. The Commission alleges that Heinen' actions caused Apple to miss recording $20.3 million in compensation expenses. Heinen is further said to have signed fictitious board minutes, stating that the board had approved the grant to Jobs on October 19th as part of a "Special Meeting of the Board of Directors." The meeting never occurred.
Heinen must pay disgorgement of $1.575 million (the in-the-money portion of the proceeds she received from exercising backdated options), and $400,000 in interest. On top of this is a civil penalty of $200,000.