Apple stock-option fallout: investor lawsuit and twin U.S. gov’t investigations

“Even as Apple Computer shifts its focus to the annual Macworld conference next week in San Francisco, the Cupertino maker of Macintosh computers and iPod digital media players still faces fallout from the unfolding scandal surrounding its widespread manipulation of stock options,” Jessica Guynn reports for The San Francisco Chronicle.

Guynn reports, “The latest threat comes in the form of a shareholder lawsuit filed against Apple executives and directors in federal district court in San Jose, the highlight of which is a slew of options granted in 1997 to top executives right before a crucial $150 million bailout of the struggling computer-maker by Microsoft Corp.”

MacDailyNews Take: Microsoft’s $150 million investment in non-voting Apple shares was not a “bailout.” It was a dog and pony show created by Apple and Microsoft to bolster investor, media, and customer confidence in Apple during rough times.

Guynn continues, “Potentially more troublesome to Apple are twin investigations by the U.S. attorney’s office in San Francisco and the Securities and Exchange Commission. But Apple gained a key tactical advantage with its ‘unabashed’ defense of Jobs that got a euphoric reaction from Wall Street, putting pressure on the government to tread carefully, crisis management expert Eric Dezenhall said.”

“‘Now it’s up to prosecutors and regulators to demonstrate that they have a real legitimate beef,’ he said. ‘They have to ask themselves if this is a fight worth having.’ Federal regulators and prosecutors refused to comment on their investigations,” Guynn reports.

Guynn reports, “The suit also spotlights another backdating controversy involving Jobs, this one during his tenure as chairman of Pixar Animation Studios. Federal authorities are probing options granted to Pixar executives from 1997 through 2003, the same period as Apple. Pixar executives received options at lows in 1997, 1998, 2000 and 2003, a statistically improbable pattern, analysts say. Jobs was not among the executives. Walt Disney Co., which bought Pixar, said in November that its board is conducting an independent investigation. Pixar is not being sued by shareholders because it no longer is an independent entity.”

Guynn reports, “Apple and Pixar are among nearly 200 companies whose options practices are being investigated. The sweeping accounting scandal has hammered corporate America. Dozens of companies have restated their earnings, more than 60 executives and directors have lost their positions and executives from two companies have been indicted. Apple’s situation is different than most because its success is so closely entwined with Jobs.”

Full article here.

Related articles:
WSJ: Steve Jobs, backdating miscreant – January 03, 2007
Should Steve Jobs be allowed to survive Apple’s options backdating scandal? – January 02, 2007
Apple options probe shines spotlight on former execs Anderson and Heinen – January 02, 2007
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
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Former CFO Anderson helped turn Apple Computer around – October 05, 2006
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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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Disney: no material impact from Pixar options – August 09, 2006
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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

15 Comments

  1. Ostrich,

    MacDailyNews Take: Microsoft’s $150 million investment in non-voting Apple shares was not a “bailout.” It was a dog and pony show created by Apple and Microsoft to bolster investor, media, and customer confidence in Apple during rough times.

    So this is your only take on the article? A qualm over something that is pretty much unrelated to the topic at hand?

    Get your head out of the sand…

  2. Protestors, hecklers, outraged shareholders, media hounds, and the like threaten to derail this year’s performance by His Steveness on the MacWorld stage.

    Anyone taking (or giving) odds on whether or not he shows up for the Keynote?

    You might make more on such a wager than you ever will buying AAPL.

  3. The other, not insignificant, factotum behind the MSFT 150M investment was them getting caught with their pants down, having ‘stolen’ Apple’s crown jewels – QuickTime for Windows.

    Remember, MSFT hired the same SF firm who originally were contracted by Apple to port QT to Windows. When MSFT released Video for Windows, Apple engineers found byte-for-byte copies of QuickTime code. MSFT pulled VfW and came up with their clean-room engineered Windows Media Player.

    Part of the Apple-Microsoft deal was Apple agreeing not to sue Microsoft over this. Also, in addition to the 150M stock purchase (long since sold, btw,) MSFT promised to maintain OS X versions of MS Office for five years (since expired.)

  4. Stock option scandal drives down stock.
    Investors sue Apple for scandal driving down stock.
    Investor’s suit against Apple also drives down stock.
    Investors who sued Apple and drove down the stock sued for driving down the stock.
    Wash, Rinse and Repeat.
    And the lawyers always win.

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