Shareholders allege Apple execs reaped ‘millions’ in unlawful profits

“Life for Apple’s lawyers became even busier this week after a fourth lawsuit over stock options allegedly granted on the wrong dates was filed,” Colin Barker reports for ZDNet UK.

Barker reports, “On Tuesday, lawyers acting on behalf of Apple shareholders filed actions against the company claiming that it ‘manipulated options grants to sell more than US$1 billion in company stock,’ according to Bloomberg News.”

“At least three other actions along similar lines have already been placed in U.S. courts. The lawsuits all claim that the company’s chief executive, Steve Jobs, and other executives backdated their share options, and later cashed them in shortly before Apple’s stock price fell,” Barker reports.

Full article here.

Related articles:
How options-backdating irregularities can affect your Apple Computer stock – August 23, 2006
Apple’s options imbroglio: Mac-maker granted options at or near key events in company’s history – August 18, 2006
Apple added to Nasdaq’s list of ‘delinquent companies’ – August 18, 2006
Apple unlikely to be delisted by NASDAQ – August 16, 2006
Apple CEO Steve Jobs drawn into stock options scandal – August 15, 2006
Apple announces update regarding stock option grants – August 11, 2006
As expected, Apple delays quarterly results due to stock-options grants review – August 11, 2006
Some stock options grant decisions were made by Apple board, and potentially, CEO Steve Jobs – August 10, 2006
Disney: no material impact from Pixar options – August 09, 2006
Pixar options draw scrutiny – August 08, 2006
Apple stock options scandal? What scandal? – August 07, 2006
Class action lawsuit over stock options filed against Apple Computer, Inc. – August 04, 2006
Wall Street forgiving of Apple’s stock option irregularities; CEO Jobs unlikely to be terminated – August 04, 2006
Apple’s stock option irregularities escalate into a scandal as world awaits Steve Jobs’ WWDC keynote – August 04, 2006
Apple warns of profit restatement dating back to 2002 – August 04, 2006
Apple loses 3.5% to $67.15 in premarket trading – August 04, 2006
Apple announces update regarding stock option grants – August 03, 2006
Shareholder’s options suit against Apple alleges ‘striking pattern that could not have been chance’ – July 11, 2006
Apple announces update regarding stock option grants – July 05, 2006
UBS: stock options probe unlikely to hurt Apple – June 30, 2006
Apple joins growing list of companies entangled in stock option ‘irregularities’ – June 29, 2006
Apple to investigate stock option grant ‘irregularities’ made between 1997 and 2001 – June 29, 2006

35 Comments

  1. Cue all the “Steve Jobs is going to “fry” jokes

    NO WONDER CREATIVE GOT WELFARE.

    “The point is, ladies and gentleman, that greed — for lack of a better word — is good.

    Greed is right. Greed works.

    Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

    Greed, in all of its forms — greed for life, for money, for love, knowledge — has marked the upward surge of mankind.”Gordon Gekko

  2. Given that no one really knows anything about the nature of the options handling, I think the lawsuit could be more properly described as “class action trial lawyers jump to reap tens of millions, shareholders to get pennies for their troubles.” That’s the only thing certain about this story.

  3. Executives of publicly traded companies are prohibited from selling stock during certain periods of the year.

    Backdating stock options is one thing, selling stock just before the stock goes down in value is something else.

    Done together and timed correctly, the executive can make a pretty penny, though in Apple’s case certainly not a Billion dollars in profits (not stock value), even over years of the practice.

    Companies backdated stock options because it provided a good incentive as well as a bonus for executives who’d worked hard, but the stock had not necessarily gone high enough to provide a sufficient reward.

    Selling stock shortly before the stock’s value goes down is a time honored practice. Executives have a measure of inside knowledge on how the company is doing, though that alone is certainly not indicative of how a stock will fare over time.

    Still, this is a messy situation for Jobs & Company (and many others).

    What’s sad is that Bill Gates, the “If I Only Had A Dime For Every Blue Screen of Death in Windows” executive, profited immensely by owning stock and running a criminal company.

  4. Backdating stock options is one thing, selling stock just before the stock goes down in value is something else.

    The alledged financial loss to shareholders is a red herring.

    Since January 2005, for each $1 earned through options grants, shareholders received $25 in stock appreciation. The ratio just grows the further back you go.

    If 10% of the value fo those grants resulted from backdating, it cost shareholders practically nothing.

    You watch, the lawyers will make millions in the sutis, and their clients will get coupons good for products.

  5. “The alledged financial loss to shareholders is a red herring.”

    Yep, Apple execs steal from you and you don’t care. What would they need to do? Boil and eat your first born child?

    Backdating options is perfectly legal IF you account for it properly rather than PRETENDING you issued them on that date.

    Just like Bill Clinton didn’t get indicted for getting a blowjob, but for LYING about it, these guys are not in trouble for the underlying practice, but for LYING (in the company financial statements) about it.

    “If 10% of the value fo those grants resulted from backdating, it cost shareholders practically nothing.”

    As for the price difference, using Apple’s numbers for last year, if I issue an option, good for 2 years at the 52 week low price, on the that the stock is at it’s 52 week high, it’s worth $45 on that day rather than $11. That’s 400% of declared value they’d run off with, not an extra 10%

    You must also realize that in exercising that option, Apple execs also get a piece of the appreciation YOU as a shareholder would otherwise have got. That’s just the way stock option compensation works, nothing illegal there.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.