“Steve Jobs, chief executive of Apple Computer, was handed 7.5m stock options in 2001 without the required authorisation from the company’s board of directors, according to people familiar with the matter,” Richard Waters reports for The Financial Times.
Waters reports, “Records that purported to show a full board meeting had taken place to approve Mr Jobs’ remuneration, as required by Apple’s procedures, were later falsified. These are now among the pieces of evidence being weighed by the Securities and Exchange Commission as it decides whether to pursue a case against the company or any individuals over the affair, according to these people.”
“According to an Apple filing in 2002, the options under review were handed to Mr Jobs in October 2001, at an exercise price of $18.30 a share. However, the purported board authorisation was dated near the end of the year, suggesting that the benefits were both not properly authorised and were backdated. Mr Jobs later surrendered his options before they were exercised, implying that he did not gain any direct benefit from them. He was later given a grant of restricted stock by the company instead,” Waters reports.
Full article here.
Related articles:
What would Apple be worth without Steve Jobs? – December 27, 2006
Piper Jaffray: Steve Jobs not at risk in stock options case – December 27, 2006
Apple shares push into positive territory, top NASDAQ most-active list – December 27, 2006
Shares of Apple Computer fall 5% in pre-market trading – December 27, 2006
Faked documents may be at core of Apple options probe; Jobs seeks outside legal representation – December 26, 2006
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
HOLY COW! Stevie got his hand stuck in the cookie jar but dropped the cookie and pulled his hand out at the last minute! No wonder he’s got his own lawyer!
They [the powers that be at Apple] go through the trouble of falsifying that a full board meeting had approved these options, yet Steve never exercised them. Did he know, and then feel it was too risky to go through with it? Not sure. In any event, he never did exercise them, so that’s a major plus to him. Still, there could be some type of reprocussions if he was directly involved with the whole scheme. No, he didn’t profit from it, but that fact that he was even granted them in the first place is now suspect.
It’s all good. He didn’t really do anything.
brings a whole new meaning to the phrase “reality distortion field”
Whatever the reasons were at the time, it’s a good thing Steve Jobs surrendered the options in exchange for the restricted shares, without ever exercising them. At the time, I think the options were “underwater” but if he had kept them, they would be worth much more now than the restricted shares. But it would have looked bad if he had personally gained from the transaction under investigation.
As long as Jobs stays with Apple I’m happy. Could not care less about the price of shares as I don’t own any and Apple will continue to make excellent products regardless of the share price.
Clarification: No, he didn’t profit from it, but the way in which he was granted them in the first place is now suspect.
Oh, and while I’m at it that’s “repercussions”
Eric,
Tell that to all the Enron stockholders and employees. Kenneth Lay, Jeffrey Skillings didn’t really do anything either.
Skillings is serving 24 years 4 months for the record.
BTW AAPL is down $2.47 in after hours trading. Between this and the stock restatement on Friday AAPL is going to take a huge hit.
Hold on, it’s about to get ugly……….real ugly.
Comparing Apple and Enron is a masturbatory exercise, trying to sound like you know more than you do.
Enron blew up, then was busted. Apple is a functioning company.
Steve,
I’m not comparing Enron to Apple. The point I was trying to make was that if the allegations against Steve Jobs are true then he’s no better than Kenneth Lay or Jeffrey Skillings. Sorry that you didn’t get my previous post.
No, the analogies are not the same. Kenneth Lay et.al. falsified the majority of their records to indicate to employees and shareholders alike that Enron was in good health when in fact the company was dying. They were doing all that they could to drive the stock upward before dumping before the final collapse of the company. This was a massive and purposefully orchestrated fraud that allowed them to profit on a companies demise. By the time the smoke had cleared, many of the employees had lost almost their entire retirment funds.
In Apple’s case, there were improper back-dated options and falsified BOD meeting documentation. While these are very serious allegations, the fact remains the company is healthy. It was healthy when these options were first issued. The restated finances will hurt Apple’s stock propositions for a while, but many investors will most likely see this as an extended buying opportunity. This will cost some people a bit of money, but nothing indicates that what has happened at Apple could come close to the disaster that was Enron.
As for Steve Jobs, the acceptance of the improper grants (not their excersise), the knowledge of other such grants, and the knowledge of accompanying falsified documents is enough for the SEC to prosecute him. However, the fact that he did not excersise the grants is a mitigating factor. I would expect a maximum penalty of a 5-10 million dollars in fines and a possible jail sentence of 30-90 days with possible community service. However, if he is found guilty of anything, he will more likely face a couple million in fines and will not have to serve any jail time. In any event, I’m positive that he would most likely remain CEO.
Just transfered some more funds to the TDameritrade account in preparation for yet another good buy.
“No, he didn’t profit from it, but that fact that he was even granted them in the first place is now suspect.”
The crime was complete when he knowingly took options based on falsified documents. Secondly he did profit from them, he got preferred stock instead. But even if he didn’t swap them for preferred stock the analogy is this:
Some dirt bag steals your car, they can’t find a chop shop to take it to, so they drive it back and park it in your driveway. They still committed a crime when they took the car. whether they sold the car they stole is irrelevant.
In this case Steve did take the options to the chop shop and walked away with preferred stock.
“But it would have looked bad if he had personally gained from the transaction under investigation.”
Not in the eyes of lawyers, whether he gained or not is completely irrelevant. The crime was complete when was involved in the falsification of the records.
“However, the fact that he did not excersise the grants is a mitigating factor.”
NO NO NO. He swapped them for preferred stock because they were underwater. Nothing suggests that he wouldn’t have exercised them if they were worth anything. In fact he found a way to launder them, and profit from the 2nd transaction.
“I’m positive that he would most likely remain CEO.”
Felons convicted of securities fraud can’t be the CEO of a public company. No ifs, buts, wishes, hopes whatever.
The best he can hope for is to cut a Martha Stewart like deal with the SEC. She is banned for 5 years from being an CEO or an executive officer or a public company.
And that’s only if the SEC is feeling generous. This is a much bigger thing than what Martha did.
It shows that Steve is prepared to play it fast and loose with the rules and use Apple as his own personal piggy bank.
So Steve’s very likely going to be resigning as CEO of Apple and resigning from the Disney board soon.
“another good buy.”
Lots of people will be waiving Good-Bye to Apple shares today. At least Apple has the faithful sheep who will buy the stock and ride it down.
I see the article is from the Financial Times. If a publication as respected as The Economist is fair game because it’s British, surely we should see some rants soon about how the FT is a biased anti Apple rag.
There is absolutely nothing new in this story. We already knew about the backdated options and their refusal by SJ. How do you think that this many months old story got started? They found the documents — back then. Now the media drag out the same story and say, “Ooo, lookie here what we have found.”
Having said that, the practices of backdating options are unethical. But then the corrupt “campaign contribution” — aka, bribe taking — congress set up the sleazy rules to permit those who bribe them their quid pro quo money opportunity in the first place.
“We already knew about the backdated options and their refusal by SJ. “
Denial, it’s not just for Africans any more.
As you can see Steve orchestrated a grant to himself, ignoring the rules, and had the paperwork faked to cover it, then laundered the resulting options. He didn’t “refuse” anything. He made over a hundred million out of the sequence of transactions.
THIS STORY IS NOT NEW! THIS STORY IS NOT NEW! THIS STORY IS NOT NEW!
Steve lives for his strong ideals on the first palce, not only for his money .. as many do. The weak point of Apple at the same time. He Steve rules.
it seems like there is a lot of speculation flying around here. I don’t see anywhere in the article where it says Jobs forged the documents himself or does it give any detail to the determining factors. Let’s just be patient and hope this doesn’t cause a step-down for Jobs. We don’t have all the facts and I really doubt the Financial Times is breaking this story. Apple and the SEC I am sure are already aware of this particular situation and its implications. I have a feeling that he is in some serious heat though. Not sure how “ugly” it is going to get but it sure will be interesting. You may be surprised how these things get handled not in the papers but in the backrooms of our gov’t buildings. Just because it’s a headline to us doesn’t mean it is to the parties involved.
Do we all believe this story as the facts set in concrete? Are all the facts there? Is this the whole story? Alot of assumptions here based upon how much information? Let’s wait and hear the whole story.
I think Steve is a billionaire and been around long enough to have other people take care of all these monetary things for him. Did someone under him make a mistake? John Edwards employee called Walmart trying to get a PS3 for him. Was this direct from Edwards or his employee abusing his power? Still Edwards took the hit. Noone can remember the employees name.
This appears to be a possible mistake by Apple’s financial lawyers, etc. If the law says that there has to be a board meeting to get approval first, then the lawyers dropped the ball? Steve is much too busy with other things than to oversee details on issues like this.
I don’t think Steve really needs any more money and would not risk his position to do any type of coverup. I think his staff dropped the ball and made a mistake.
All you Windoze fan boys go home now, we’re tired of you.
Steve was here.
Steve is here.
Steve will be here.
And he will continue to make life hell for you. Amen.
This latest press article has caused AAPL to drop to a low of $77.22 in pre-market trading, but then the stock has rebounded to a high of $79.60 and is currently trading at $79.48.
If AAPL can hold the $79.00 level, then it will probably break though to make new session highs and may even go green later today, depending on analyst reactions.
This price action:
(1) Today’s low (so far) is higher than yesterday’s low, and
(2) Stock is attempting to rebound
is an important signal.
The first indicates there is less panic selling than there was yesterday. No mad rush to the exits, at least not today.
The second indicates that, similar to yesterday, investors are more than willing prepared to put this issue behind them, once all the facts are out.
Apple’s 10-K filing (annual report) can’t come soon enough – tomorrow is the filing deadline, unless Apple requests an extension from the SEC.
You will probably see price support on the stock, at least for today and tomorrow, as there are a lot of limit orders on the books at various price levels, as well as short sellers closing out positions before year end.
There was a whole lot of money to be made by anyone who shorted thhe stock at $93 a month ago. Over 15% return in a month if they close out the position now at $78 or $79.
The real test is what happens next week, but by then all the info will have been released publicly.
“Steve is much too busy with other things than to oversee details on issues like this. “
Gimme a break. Too “Busy” as CEO to have any involvment with the company granting 7.5 million options to anyone, especially himself?
And in 2001 the biggest thing on Steve’s mind should have been Apple’s financial condition.
Remember in 2001/2002 Apple was much worse off then it is now. The stock price had been cut to a third of it’s value. Apple had just reported a net loss of 25 million for FY 2001.
They had every reason back then to be minimizing the effect of options grants on profits.
A grant of that size would be the last thing Apple would want on it’s books at fair market value, and an in the money grant would be the last thing that inverstors would have felt was fair, and the last thing a competent CEO would be unaware of.
You have two choices, either he’as an incompetent yokel, or a thief. personally I don’t think he’s a yokel.