“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
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
All that glitters is not gold.
“Genius” Steve, like his hardware and software, does not, my friends, ‘just work’. And, now the whole world knows.
Will the Feds come on stage and put him in cuffs in the middle of the keynote next month?
“Let’s wait until December 29th to see whether Apple files the 8-k, and if so what is in it.”
Sure, OK, 9:57, 20 million shares changed hands, and people WISHING they could still get $78.35…
I think you need to look at the next level of resistance that Apple’s going to bust through on the downside.
SeparateCounsel said: “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.”
Lawyers representing the company cannot defend or represent the interests of its employes (or board members, etc.) They are different parties with potentially different interests (regardless of any wrongdoing). Even though no one may have done anything wrong the company still cannot defend the employee. Yes their interests may be the same in many respects but the attorney for the company is ONLY representing the interests of the company. Even if that may, at times be adversarial for the interests of an employee. The fact that Steve, or anyone else involved in this has retained their own attorney is simply a prudent move if there is any potential for personal exposure, which, as I read the circumstances involved here, there could be. Reading anything into the fact that Steve retained an attorney is meaningless.
Steve is a smart man so he made an intelligent decision to retain an attorney to represent him.
Everybody is innocent until proven otherwise. I’ll give him the benefit of the doubt.
Even i’m innocent of throwing chairs. Did someone see me doing that? But seems the trial is already made and waiting for a sentence.
“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.”
Exactly…Apple’s lawyers represent Apple not SJ. IF SJ is being implicated individually, he would need a lawyer to represent him.
SeparateCounsel, I have no desire to get into a pissing match with you.
I’m just calling it as I see it, and reporting what I believe professional traders are thinking/doing.
Along those lines, an analyst at Piper Jaffray just issued a note saying only a 5% probability exists of Steve Jobs being involved, and not at all surprising that he’s getting his own lawyer.
Support: AAPL’s primary support was in the $77.75 to $78.00 area. If that falls, AAPL has secondary support in the $76.90 to $77.00 area. Below that, tertiary support lies in the $76 area. Look for potential bounces if the stock approaches these areas.
Resistance: The ~$80 is the first level of any meaningful resistance.
kk,
You must be one of those folks that sit
around judging people from the sidelines,
never looking inward. But hey, as long
as you are comfortable in your own skin,
right? KARMA, please. WTF is this, ‘My
Name Is Earl’? I don’t think misdeeds
should be forgotten, but I also don’t
think that they should be brought up
when they are irrelevant. Sorry everyone,
but self righteousness pisses me off.
This is real bad news.
Real bad news.
Jobs is possibly looking at jail time. The former APPle CFO is being fitted for his jail uniform now….
At the least this is a total distraction from the job, plus it paints Apple as a sleazy company.
If these accusations were being made about Microsoft and Gates…whew!; Just imagine the negative MDN take.
MoMo Trader, Where or how do you get your information? I hear this stuff but can’t figure out how it is derived. Thanks.
Counsel, in a word, Bollocks
California bar Association Rules of Professional Conduct, Rule 3-600. (E)
A member representing an organization may also
represent any of its directors, officers, employees,
members, shareholders, or other constituents, subject to the
provisions of rule 3-310. If the organization’s consent to the
dual representation is required by rule 3-310, the consent
shall be given by an appropriate constituent of the
organization other than the individual or constituent who is
to be represented, or by the shareholder(s) or organization
members.
Steve was happy to be represented by the same firm, now he feels he needs different representation. This is Required only if there is a conflict of interest. However if the decision wasn’t forced on him, he’s made a decision that he no longer thinks it’s a smart idea to be represented by the same people who represent Apple.
So can you read anything into that for sure? No. Does it make me more nervous than Steve continuing to be represented by the same firm? Absolutely. It means there’s some reason he or they felt a need for that.
JP Morgan issued a note saying the Law.com article has very little to say about Steve Jobs, and JP Morgan reiterates its “Overweight” rating on AAPL.
(An overweight rating in JP Morgan parlance advises fund managers to buy more of AAPL than other stocks in the same industry or sector.)
AAPL is currently trading at $78.43.
Curious, most of the sell-side analysts (Piper Jaffray, JP Morgan, Goldman Sachs, Bank of America, etc) issue their research to their clients, which are mostly fund managers and wealthy individuals. These people get early access to the notes, presumably so they can make intelligent decisions before the note’s information is made public.
Many people look askance at sell-side analysts, because they have an built-in conflict of interest: their employers are investment banks, looking to sell investment banking services to the companies they cover for analysis.
Most buy-side analysts are employed by investment funds or private equity firms, and their research is usually free of conflict of interests. However, their research very rarely gets published.
As for the information itself, it can and usually does become public, usually within a matter of minutes or hours (and sometimes days), either through wire services (Reuters, Bloomberg, etc) or through media outlets such as CNBC or the Wall St. Journal or many others.
The biggest signal of information is the stock’s price action. If a stock’s price falls with increasing volume without any news being disseminated, you can be sure that somebody somewheere has downgraded the stock.
Lastly, you can use any number of websites for technical analysis of a stock, where you can determine support/resistance levels, trendlines, technical indicators, etc.
If you want to trade or invest stocks (trading is not the same as investing), you need to be aware of these sources of information, and how they can move markets.
Moment of truth for AAPL: It is now trading at $79.68, having reached a high of $79.96 — just below the $80 resistance level identified earlier.
Watch the price action here as the stock tests this $80 level. The price action will tell you a great deal about where AAPL is headed later today and the rest of this week.
How does the stock-options scandal affect Al Gore?
AAPL is currently trading at $80.30, having reached a session high of $80.45.
Based on this price action, AAPL appears to be breaking through the ~$80 resistance level.
Look for confirmation of whether this breakthrough is real by watching whether this level holds as support as the stock pulls back.
If the $80 break is decisive and confirmed, then the stock will probably consolidate the rest of the week, and then start an uptrend next week, as the new year rolls in. (This will be helped enormously if Apple can file its 8-k report with the SEC by December 29, 2006, without applying for a new extension.)
If the $80 level fails to hold on a pullback, then the stock will probably trend down towards today’s low of $76.77.
(Note to traders: The markets will be closed on Monday, January 1 for the holiday. There is also speculation that the markets may be closed next Tuesday or Wednesday as well, in honor of the death of President Gerald R. Ford.)
Question: “How does the stock-options scandal affect Al Gore?”
Answer: It doesn’t. The stock option problems at Apple arise from option grants made from 1997 through 2002. Al Gore didn’t become a director at Apple until March 2003.
As we head into the final 30 minutes of trading, AAPL has solidly and decisively broken through the $80 resistance level. It has in fact, gone green – it’s up nearly 30 cents from yesterday’s close.
Needless to say, this price action confirms that Wall St. does not see today’s Law.com article as affecting Apple’s or Steve Jobs’ future prospects.
The real relief rally in the stock will come, though, when Apple finally files its annual report from the SEC, which may be within two days, or by mid-January (if Apple requests an extension).
Good day to all, and happy investing.
(Late addition: It appears that ChangeWave Research is increasing its price target for AAPL to $125.)
A stock that goes from 50 to 93 and then back to 77 is not “tanking”. It is just being a stock. Just when a test of 100 looked like a sure thing, it corrected. That’s what stocks do. (I soooo want to say “Welcome to the Social”… go figure.)
A news item like this can trigger a selling climax (flush out all the scared short term money) and put in a short term bottom. But you never really know except in hindsight.
Since the accounting restatement won’t affect the company’s business a whit, I’m more interested in the season’s ipod and mac sales (the real potential for upside surprise is on the mac side).
The group psychology of markets is a fascinating beast. Everyone now “knows” that Apple runs up before MacWorld and the corrects on the news, no matter how good. Soooo… this year, the stock corrects well in advance of MacWorld. If you know there’s a race for the door coming, you at least stand close to the door. So does everyone else and suddenly the race comes early. Basically whenever something is widely “expected” in stock movement, the expectation of it makes something else happen entirely.
But if the mac business is really growing, that’s real growing profits and cash flow that will drive the long run.
My advice is to always buy AAPL, no matter what the market conditions or hype. AAPL is ALWAYS a buying opportunity!
THIS IS A GLORIOUS BUYING OPPORTUNITY!! BUY, BUY, BUY!!!