“It must be some consolation for Apple Computer that the company’s annual report is going to be published during the slowest news week of the year,” Justin Scheck reports for The Recorder.

“Given the uncomfortable admissions about its past stock options practices — and the cost to the company — that Apple will have to make in the delayed SEC filing due by Friday, less public attention is probably a good thing,” Scheck reports. “But the lull is unlikely to last long. According to people with knowledge of Apple’s situation, federal prosecutors are looking closely at stock option administration documents that were apparently falsified by company officials to maximize the profitability of option grants to executives.”

Scheck reports, “The faked documents were revealed in a three-month internal probe — conducted by Quinn Emanuel Urquhart Oliver & Hedges — that concluded in October, said individuals familiar with the case who requested anonymity because it remains the subject of criminal and civil government investigations… Since the fruits of Apple’s internal investigation were disclosed to San Francisco federal prosecutors in October, the U.S. Attorney’s Office has shown great interest in the case, said individuals with knowledge of the probe.”

“And while it’s not yet clear who the prosecutors’ focus is, Apple released a statement in October that ‘the investigation raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants.’ Apple spokesman Steve Dowling wouldn’t comment beyond what is in the public filings. But individuals with knowledge of the case said those ex-officers are Nancy Heinen and Fred Anderson, the company’s former general counsel and chief financial officer, respectively,” Scheck reports.

“One outstanding question with possibly huge implications for the company is what kind of liability Jobs — the superstar CEO credited with much of Apple’s success — will face. In its October SEC filing, Apple said that, ‘in a few instances,’ Jobs ‘was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications.’ The statement said no current Apple executive was suspected of wrongdoing,” Scheck reports.

“But in recent weeks, Jobs has apparently decided that he needs his own legal representation, separate from Apple’s lawyers at O’Melveny & Myers, and has hired his own attorney to deal with the SEC and Justice Department,” Scheck reports. “While it will likely take some time — perhaps a matter of months — for the government to decide whether to file criminal charges against Jobs, the 10(k) filing on Friday should provide plaintiffs lawyers with some ammunition for their suits against the company.”

Full article here.

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