Faked documents may be at core of Apple options probe; Jobs seeks outside legal representation

“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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  1. Let it be put on record that I am representing his Steveness.

    There is no reason to worry, folks, Steve has done no wrong, unless you are strongly religious and frown upon the advances society has made since biblical times.

    He is seeking my counsel because of some liberties a certain J. Malo took on him. That is all; Steve WILL be giving the Macworld keynote on January 9th, 2007.

  2. I was wondering whether and when MDN would pick this story up.

    Poor Fred Anderson. I don’t know the circumstances – obviously. The guy has had such a stand up reputation, now completely tarnished. (Fred was the CFO during this travesty.)

    Silicon Valley is shaking. Lots of cocktail party conversation on this one. This needs to be resolved ASAP.

  3. Dear MDN,

    Please allow Misha Bawa to continue posting. He may be crude at times, but he promises that he will make a sincere effort to stop. Misha is at heart an Apple fan first and foremost, and is typically regarded as a valuable contributor to the Apple community.


    Misha “3rd person” Bawa

    MDN magic word: “hard”…

  4. kk,
    I would think Jobs would be ahead in the “karma” since he has spread the best OS to millions of users. He has directly improved the computing life of millions. That has to have a couple karma points attached to it right?

    The Dude abides.

  5. Hey R:

    I have read all the chapters. You need to realize what is truly important in life. Apple is a company, nothing more and nothing less. Yeah they are a bit different than others, but a company nonetheless. A company that is made up of a lot of talented and dedicated people whom don’t get any spotlight, most of whom have not screwed their best friends or absolved themselves of their parental duties.

    Nothing makes up for abandoning a child. You must be kidding. Well, I guess if he gave all his fortunes to some adoption agencies that might make a dent.

    Yeah, the coolest OS around is certainly cool, and a little music player is nice too, but in the grand scheme of things, it is the decisions you make as a man that define you, not what you do as a businessman.

    It is quite sickening that someone’s past can be forgotten so easily.

    Be thankful for your family. You can buy another iPod and format your Mac.

  6. Seriously guys. I am a Mac user and fanatic too. Otherwise I would not read this site! But the endless glorification of a CEO is pointless.

    I hope you all had a great holiday with your families or loved ones. That is was really matters.

  7. … Apple’s stock price has been tanking recently.

    Investment firms are dumping Apple, who are watching this closely, while morons like “Insert MSNBC morons here” go on and on talking about what a great opportunity it is for everyone to buy into Apple now.

    My best guess from reading Apple’s own interenal report is the following:

    1. Whether Fred A. was a part of this or no, it seems quite fishy that the two people Apple point the finger at are no longer with the company – everyone is okay “enough.”

    2. That Steve was a nieve CEO who never really did any harm here…

    This entire interenal report is far too convienent, and the SEC isn’t sitting around drinking the eggnog and patting Apple on the back for a job well done.

    For an Apple investor these are spooky times. For those who want Apple to become the major force to brake Redmond’s hold on the entire computing industry, this hope may come at the cost of criminal activity by people far too ambitious for their anyone’s good…

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