“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.
Related articles:
Apple delays filing annual report due to ongoing stock options investigation – December 15, 2006
Options scandal: is Apple’s Steve Jobs truly safe? – October 18, 2006
Apple Computer Directors may have had conflicts of interest in options investigation – October 11, 2006
Apple’s options disclosures leave plenty of unanswered questions – October 09, 2006
Apple shareholders await earnings restatements; Steve Jobs still not in the clear – October 06, 2006
Former CFO Anderson helped turn Apple Computer around – October 05, 2006
Wall Street unshaken by results of Apple stock options investigation – October 05, 2006
Is Apple rotten at the core? – October 05, 2006
Analyst: Anderson, Heinen may be former Apple executives responsible for irregular options grants – October 05, 2006
Analyst: Apple restatement due to options irregularities not expected to be significant – October 04, 2006
Apple’s special committee reports findings of stock option investigation – October 04, 2006
Google CEO declines Apple automatic stock option grant; plans to buy 10,000 AAPL shares instead – September 01, 2006
Google CEO Dr. Eric Schmidt joins Apple’s Board of Directors – August 29, 2006
Shareholders allege Apple execs reaped ‘millions’ in unlawful profits – August 23, 2006
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
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Class action lawsuit over stock options filed against Apple Computer, Inc. – August 04, 2006
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Apple to investigate stock option grant ‘irregularities’ made between 1997 and 2001 – June 29, 2006
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.
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.
wonder boy steve may be in big trouble….
& the last place he belongs is among hairy, fat & lonely inmates
lets all hope that Steve is innocent. Im sure billy boy and ballmer are happy though.
Maybe he needs a little karma. Shouldn’t have abandonded the child he fathered or screwed his co-founder.
Great CEO…..shitty dad and friend.
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.
Sincerely,
Misha “3rd person” Bawa
MDN magic word: “hard”…
kk– u need to read ahead a few chapters.
On a positive note… I’ll be able to watch Steve Jobs getting carted off to jail on my new iPod video.
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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.
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.
brings a whole new meaning to “Reality Distortion Field” :-p
The Dude,
If that were true then Bill will soon be getting hit with a bus.
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.
… 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…
The fact that Steve’s got his own lawyers is telling enough.
It now means that there is a difference between what’s best for Steve and what’s best for Apple in terms of handling this matter.
@kk: Thanks for the self-righteous feminine perspective of the world. But the world contains both yin and yang. Nothing is quite as absolute as you describe.
This whole thing is a bunch of crock. This practise is most likely common in corporate America. Apple is being singled out.
Just like the scratches on the iPods!
Just yesterday, I posted on MDN that the stock option investigation was the number one overhang that was depressing AAPL.
However, today’s news is not an indication that the world is falling.
The professional traders are already calculating the worse case scenario:
– The feds might try to put a few former execs in jail, and probably require Apple to pay a fine.
– But so far, Steve Jobs isn’t personally affected.
– Big deal.
And sooner or later, this realization will come up on the market, and the stock will start rebounding.
Surprisingly, it may be as soon as two days from now – Friday, December 29, 2006 – which is when Apple has to file an update with the SEC. (Or get an extension until mid-January.)
In terms of trading AAPL today, look for the stock to bounce back (i.e. reverse the decline and start going up) at the $77.75 to $78 level, which should provide support.
AAPL may even close up from yesterday’s close, given the propensity of professional traders to go for a short squeeze, when news such as this breaks.
Additional comment: Note that not a single Wall St. analyst that covers AAPL has issued an upgrade/downgrade/reaffirmation based on this Law.com article.
Why not? Because there’s no real news in it, at least not yet.
The real news will come when Apple files its own 8-k annual report with the SEC (possibly as soon as two days from now), and again when the feds conclude their investigation.
Lastly, Steve Jobs hiring a lawyer to represent him personally is not necessarily an indication that his interests are no longer aligned with Apple’s. (If that were truly the case, he would no longer be Apple’s CEO.) Rather, it’s simply prudent to hire a lawyer if and when the feds come knocking at your door.
Look, all of this is speculation until charges are laid, and this has not happened. So let’s just see how the whole issue plays out before we start before we start passing judgement.
No analyst posted a report because they’re all out for the week. I should know. I work in the offices and it is DEAD here.
Hmmm, what was that name of that unauthorized biography that raised a rukus a while back?
iCon
Sadly ironic.
Apple’s stock has been going down for a number of reasons. I believe Cramer’s version on why the big firms are dumping the stock. I also believe it’s temporary. Apple is only a company, if “only a company” refers to a publicly traded organization intent on making money. But how it makes its money is also important. It is still poised to grow. A temporary decline is fine. I’d bet that once the smoke clears here, it’s going to be in The Company’s favor.
“This whole thing is a bunch of crock. This practise is most likely common in corporate America. Apple is being singled out.”
Don;t be silly dozens of other companies have already been probed, people are in jail for this already.
“- But so far, Steve Jobs isn’t personally affected.”
But he was and he knew. All they’ve got to do is put the case together.
“Lastly, Steve Jobs hiring a lawyer to represent him personally is not necessarily an indication that his interests are no longer aligned with Apple’s.”
It’s pretty good indication, It happens all the time in criminal investigations and trials. Often defendants are represented by the same lawyers. If a corporate officer has done no wrong, the corporation will defend itself and them. But once the defendant’s interests differ e.g one is about to testify against the other, or one defendant’s strategy to protect themselves is prejudicial to another defendant, separate counsel is required.
“Note that not a single Wall St. analyst that covers AAPL has issued an upgrade/downgrade/reaffirmation based on this Law.com article.”
Down 5% on a volume of 12 million shares, and it’s only 9:41 I think the smart money’s speaking.
And at 09:53, AAPL has just risen to session highs of $78.35. (Btw, the next level that shows resistance will be the ~$80 area.)
Determining what the “smart money” is doing is silly on such a short timescale, unless you’re daytrading stocks.
Let’s wait until December 29th to see whether Apple files the 8-k, and if so what is in it.