“Shares of Apple Computer gained ahead of Friday’s opening bell after the maker of iconic iPod digital music player provided some answers to lingering questions about the nature and extent of improprieties with its stock option granting practices, saying a probe has concluded CEO Steve Jobs was ‘aware or recommended’ some favorable grant dates but didn’t personally benefit from it,” Steve Goldstein reports for MarketWatch.
MacDailyNews Note: AAPL is currently up roughly 4% to $84.02 in recent pre-market action.
Goldstein reports, “The company also outlined the financial impact of the options probe, saying certain results would be restated to record an after-tax charge of $84 million for additional non-cash compensation expense. It quantified the impact of the charge on its bottom line, saying after-tax profits would be lowered by $10 million for fiscal 2004, $7 million for fiscal 2005 and $4 million for fiscal 2006.”
Goldstein reports, “In filings with the Securities and Exchange Commission, Cupertino, Calif.-based Apple said a special committee of its board found that while Jobs was ‘aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications.'”
“There was no evidence of misconduct by current management, the committee said, but it again noted, as it did in October, that the probe raised serious concerns about the actions of two former officers in connection with the accounting, recording and reporting of stock-option grants,” Goldstein reports. “The committee said the board has ‘complete confidence’ in Jobs and the rest of Apple’s senior management team. Of 42,077 stock-option grants made on 259 dates between October 1996 and January 2003, 6,428 grants on 42 dates have been deemed as not the proper measurement dates, Apple said.”
“Jobs co-founded Apple in 1976 with Steve Wozniak, developing early personal computers including the Macintosh. In 1985, Jobs left the company, going on to lead computer animation pioneer Pixar and NeXT Computer, whose purchase by Apple in 1996 brought him back into the company’s fold. He has held the CEO post since Gil Amelio’s departure in 1997, and is largely credited with bringing the company and its stock back to prominence,” Goldstein reports. “Jobs collects a nominal salary of $1 per year, going back to at least 2000. That year, in January, the company announced it had given him a Gulfstream V airplane in recognition of his service to the company, as well as options to buy 10 million common shares at the ‘then-market price,’ Apple said in a press release at the time.”
Full article here.
Related articles:
Apple files 10-Q and 10-K, company to record non-cash charge of $84 million – December 29, 2006
Enderle on Steve Jobs’ honesty, possible criminal charges, and whether Jobs can attend Macworld Expo – December 29, 2006
ThinkEquity analyst: Apple sell-off due to ‘inexperienced traders,’ nothing new in options story – December 28, 2006
Analyst: U.S. Gov’t unlikely to ‘nail Apple and Steve Jobs’ – December 28, 2006
Report: Apple ‘falsified’ records on 7.5m stock options granted to CEO Steve Jobs in 2001 – December 28, 2006
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
Can you hear that faint, rustling noise?
It’s the sound of the cowardly doomsayers slinking back under rocks.
I am waiting for FRAUD’s post today after all the ‘knowledge’ he was spewing yesterday.
Watch out! It could also be the hedge fund bloodsuckers trying to lure buyers back into the market for a planned bear raid. In the long term, Apple is solid gold, but the hedge funds play dirty, so be careful.
Quite right unsquirted.. the little shits are back in their crevices. A pity they don’t stay there.
currently 84.80 +3.93
“I am waiting for FRAUD’s post today after all the ‘knowledge’ he was spewing yesterday.”
It essentially confirms all I said. It confirms that Steve knew about the grants. It confirms that he in fact selected favorable dates personally. It confirms that he was personally granted in the money options worth 20 million more than Apple said they were. It confirms that a false paper trail was put in place, specifically with respect to that grant. It confirms that there was wrongdoing by Apple employees.
As I said yesterday, it now all turns on Steve’s knowledge and intent.
Now all you have to decide is whether Steve did not know what he was doing was illegal, That he was not aware of any illegal acts of his subordinates, and that he knew nothing about the accounting implications of what he did.
You’re welcome to believe he did not know any of those things. For me it’s a stretch.
It sounds like they have Fred Anderson and/or Nancy Heinen for sure now. All that is needed now is for one of those two to sing like a canary.
Enderle WRONG AGAIN!!!!
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Fraud, all that is needed now for u to STFU!
Uh, Fraud,
Like you were telling anybody what they didn’t already know? We’ve been saying for months that I knew about it, but I did not understand the implications of it. Once I did, things changed.
Have you no clue, bozo?
S.
No Fraud, it does not say what you say it says. It specifically states there is “no evidence of misconduct by current management.” How you warp that conclusion is beyond rationality. YOU believe what you want; I’ll stick with the facts.
Fraud believes he can prove whatever he wants by twisting whatever facts are at hand to fit his own ideology. Sure, there’s no evidence of wrongdoing, but Jobs knew about it. It’s like a RICO case to him. Jobs either knew about it and did nothing about it, or he should have known about it and done something about it. He’s guilty, in Fraud’s eyes.
Seems like Fraud is trying to emit his own Reality Distortion Field®.
‘Fraud’ is named appropriately.
The fact that AAPL has jumped 5% today is entirely predictable and not that interesting.
What is interesting is that AAPL has cleared its 50-day simple moving average (sma) at $84.98, and is testing its 50-day exponential moving average (ema) at $85.10.
This price action has the short sellers on the run.
Plus, today is the last trading day of the year, the end of the week, and the start of a long holiday weekend. So anybody who’s short will most likely be heading for the exits today – means lots of buying of AAPL to cover.
In addition, we’ll likely see new money coming in the new year, possibly as early as Wednesday, January 3, 2007. (Note: The stock markets are closed on Monday for New Years Day, and again on Tuesday in honor of the death of former President Gerald R. Ford.)
Then MacWorld Expo kicks in, with the Steve Jobs keynote on January 9th, followed by earnings report on January 17th.
All of these are upside catalysts.
The only major downside catalyst visible right now is the inevitable profit taking following the earnings report (buy the rumor, sell the fact).
In summary: AAPL is heading up from here, probably back to the $93 highs. Where it goes from there will depend on the products announced at MacWorld and analyst upgrades/downgrades/reiterations.
Happy holidays!
Fraud (alias Backdate Bob) doesn’t understand a few things.
Number one, backdating is NOT illegal. The transaction needs to be treated appropriately by the accountants, and the proper taxes should be paid, but the backdating itself is simply part of a compensation package. Companies can pay employees whatever they decide is reasonable or desireable. They could simply award shares outright if they wanted to.
Secondly, the Register and Financial Times made it sound like Jobs’ 2001 options weren’t approved by the BOD until months after the fact, when in reality the grant was approved months ahead of time. It looks more like a clerical error than an attempt to falsify records when paperwork states that a board meeting occurred on the date the options were issued, but that’s beside the point. The options issued in October were approved the previous August. Now, why would someone purposely try to give that impression?
Thirdly, the total amount of restatement is $84 Mil over almost 10 years.
Fraud, get a clue. I have a fair amount of assets invested in AAPL, about 6 figures. I don’t need uninformed morons who swallow uncritically whatever the hedgies and agenda driven media are peddling, only to regurgitate it here and elsewhere, spreading FUD, and unreasonably damaging my trading accounts. Better to be silent and thought a fool than to open one’s mouth and remove all doubt.
“No Fraud, it does not say what you say it says. It specifically states there is “no evidence of misconduct by current management.””
Lets take the points one by one with quotes from the report:
Me: “It essentially confirms all I said. It confirms that Steve knew about the grants. It confirms that he in fact selected favorable dates personally.”
Report: “the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates”
Me: “It confirms that he was personally granted in the money options worth 20 million more than Apple said they were. It confirms that a false paper trail was put in place,”
Report: “The grant dated October 19, 2001 was originally approved at a Board meeting on August 29, 2001, with an exercise price of $17.83.
The terms of the grant, however, were not finalized until December 18, 2001. The grant was dated October 19, 2001, with an exercise
price of $18.30. The approval for the grant was improperly recorded as occurring at a special Board meeting on October 19, 2001.
Such a special Board meeting did not occur.”
“The Company has recognized $20 million in stock-based compensation expense for this grant, reflecting the difference between the exercise price of $18.30 and the share price on December 18, 2001 of $21.01.”
Me: “It confirms that there was wrongdoing by Apple employees.”
Report: “There was no evidence, however, that any current member of management was aware of this irregularity.”
no evidence and current are the important word here.
Report: “The Special Committee also found that the investigation had raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants.”
Under the bus go Fred Anderson and/or Nancy Heinen.
“Based on a review of the totality of evidence and the applicable law, the Special Committee found no misconduct by current management.”
Basically the report admits that Steve did things that if he had the right knowledge and intent would have been crimes, but if that knowledge intent can’t be shown, they are not. That’s what they men by “found no misconduct” when you look at the “applicable law” and no “evidence” has been found yet.
So Apple’s own people state that they have no evidence of such misconduct. That’s comforting. What is Steve going to be saying after lawyering up? That he’s guilty? What are Anderson and Heinen going to be doing? Implicating Steve before they have a plea deal worked out? Not likely.
Of course not he’s going to be saying that he didn’t know anything about the paperwork, the relevant law, or that what he was doing was wrong, because those things would provide him with a defense to prison time.
So as I said, it all comes down to what you believe about Steve’s knowledge and intent as to whether he’s guilty.
More cynically it comes down not to whether he is guilty or not, but whether that can be proven.
“Number one, backdating is NOT illegal”
Zeke, I’ll say it for the hundredth time. backdating IS illegal. There is no legitimate reason to do it. Issuing in the money options and properly recording the compensation expense is NOT illegal, but that is not convention, and sure not what happened here. Producing false documents to support options grants is prima facie evidence of the intent to defraud.
“It looks more like a clerical error “
You’re right, there also seems to be 6427 other such “Clerical Errors”
“Better to be silent and thought a fool than to open one’s mouth and remove all doubt.”
Sure Zeke, I’m thinking that about you right now.
“unreasonably damaging my trading accounts. “
Ah, Zeke. the true reason for your unfailing desire to talk up Apple comes out. Steve is the one who did the damage. At best by being ignorant of things he absolutely should have known about and understood as CEO, at worst by committing fraud. There is no doubt he understood the EFFECT of backdating options, at least the fact that he would choose and recommend specific dates is prima facie evidence that he understood it all to well. All that’s left is to show he understood the accounting implications.
Well done Apple for undertaking the investigation and getting it over
It’s known that Microsoft did the same but they haven’t even instructed an internal review as of now.
The longer they leave it the worse the SEC will come down on them.
Ha ha. We’ll have the last laugh yet!
“Well done Apple for undertaking the investigation and getting it over “
Well if you think it’s over because Apple did an internal investigation, lets see how that pans out. This is just the beginning.
fraud, you have yet to provide any real insight into the issues. what are your qualifications? my semester of corporate law certainly doesn’t make me an expert on this situation but i have an opinion (that opinion should be summarized as ‘simmer down’). we can all have opinions. is your based on some insight more powerful than conjecture?
Fraud?
Who keeps pulling your string?
Is it you?
Your See ‘n Say responses are monotonous.
Moo.
Fraud: You are correct that language is important. In law language is very important. In what was stated the law can/may NOT read anything else other than what the words say. If they find evidence that is contrary then they can challenge those words as being false, untrue and lies. You have no sound sylogism/argument or evidence to back anything you say without a “shadow of doubt”. We’ll see how this plays. If this investigation continues I have 3 letters that will get Steve out of this, RDF. Jobs is a master gamesman is for sure, wrong doing in this matter is still under consideration.
Fraud,
What you said was, “The crime was complete when he knowingly took options based on falsified documents.”
This report does not state that he KNOWINGLY TOOK OPTIONS BASED ON FALSIFIED DOCUMENTS.
Are you picking up on how this does NOT confirm all you said?
Essentially, you’ve created an unbeatable argument by padding yourself from six sides. You’re what is known as a pathological debater.
Make a claim and stick with it, boy.
“This report does not state that he KNOWINGLY TOOK OPTIONS BASED ON FALSIFIED DOCUMENTS.”
He knowingly took the options.
He knew that dates of options had been chosen for best advantage, and had in the past known about and/or made those choices.
The only debate is whether he knew that Apple was not properly reporting the expense for those options.
Apple had just come off a year where they had made a 25 million dollar loss.
I don’t have proof that he turned to his CFO and said, “OK, so I’m getting 20 million dollars worth of options, won’t that be a bit of a drag on profits?” and that his CFO turned back and said “No don’t worry, we always fake the paperwork so that it looks like we’re giving you much less”.
But it stretches belief that the CEO of a struggling company wouldn’t have asked that question and got an explanation.
We’re not dealing with a bumpkin here. We’re dealing with somebody who makes his entire income from options and stock grants and is therefore intimately familiar with the mechanics of option based compensation.
Think of it from Steve’s side. If he confesses now, he’s done. If he holds out, maybe they can’t collect enough evidence, so don’t charge him. If they do, there’s a chance he may be acquitted, or cut a deal, or maybe he looses and he’s done.
Which odds would you be playing?
“The crime was complete when he knowingly took options based on falsified documents.”
Pathological debater.
Null.
Void.
Invalid.
“It’s known that Microsoft did the same but they haven’t even instructed an internal review as of now.”
Macaday, they “instructed an internal review”, took a charge and now are no longer are under investigation.
But really who cares what Microsoft is up to, we’re talking about Apple here.
And justified, do you even understand how these discussion boards work, if they’re not to debate things, what are they for? What’s your opinion, that he’s innocent? Do you understand what’s been admitted so far and the implications of that?
For my money, I believe there will be enough evidence out there that will meet the civil standard, that it’s more likely than not that he knew what was going on.
Criminal charges require a higher standard, for Bruce, that’s beyond reasonable doubt, not without a shadow of a doubt, and can be met with verbal evidence and assessment by the jury of the witness’s credibility, not just written documents. But what that standard will likely require is to find some more paperwork or for the other people who could be charged to cut a deal and testify against him.