Mark Schwanhausser reports for The Mercury News, “Since the stock-option scandal hit national headlines a year ago this month, there has been no end to the queries: How widespread was the backdating? How did this happen? Who was responsible? What motivated executives to do it? Has it stopped?
Schwanhausser reports, “But in the wake of guilty pleas from two East Coast executives and last week’s criminal and civil charges against a third in Silicon Valley, two questions are taking on special importance as more companies complete internal reviews: Who’s the next target for federal prosecutors, and how soon?”
“This saga probably is far from over for a number of prominent, current and exiled Silicon Valley executives at Apple, KLA-Tencor, Maxim Integrated Products, McAfee, Mercury Interactive, Sanmina-SCI and other companies that have uncovered evidence that options were rigged to give recipients an immediate paper profit,” Schwanhausser reports.
Schwanhausser reports, “Backdating involves changing the timing of stock-option grants to give the recipients a head start to paper profits. Although it’s not illegal to grant options at a discount, it must be properly disclosed to regulators, investors and tax authorities. Unreported option discounts can crimp corporate profits, trigger taxes for the company and recipient and violate a company’s stock plan.”
Schwanhausser reports, “Legal experts say prosecutors will weigh a number of factors when determining which executives to charge, including:”
• Did the boss enrich himself?
• Who called the shots — and what was the intent? Such questions lie at the heart of the Justice Department’s criminal investigation of backdating at Apple and the role of Chief Executive Steve Jobs. Apple has said Jobs was aware of backdating and recommended fortuitous grant dates for others. Still, the company’s own probe exonerated Jobs, saying he was unaware of the accounting implications.
• Was there a cover-up?
• When did the abuses occur — and how long did they continue?
Schwanhausser reports, “Ultimately, however, deciding whom to prosecute will hinge on one inescapable, practical factor: evidence. Prosecutors will be leery of basing a case on circumstantial evidence. Instead, they’ll move forward with cases built on e-mail, falsified documents and testimony from firsthand witnesses who can sway a judge or jury.”
Full article here.
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Slow news day at the Merc. Let it go already, guys.
The markets won’t like that. I’ll be looking for Apple stock to drop Monday.
The notion of government bureaucrats dragging this thing out and leaving a cloud over AAPL pisses me off. Yeah, yeah, the doing it all to protect us stock holders……my ass! The do it for lust of power, plain and simple. To the “prosecutors”: Move on, already. Nothing to see here. Leave us the f**k alone.
When will these assholes get over it! The DOJ has to have better things to do and it’s a waste of the taxpayers money. This is not Enron guys!
yeh! and leave dell alone as well
/replace beer goggles
What pisses me off is how the rank and file at Apple lost stock opportunites during this period.
Apple employees can opt for 1% – 10% of their paychecks towards stock options. But because of the large grant to his Steveness (and to Ron Johnson, of Target and Retail head), employees stock grants were cut by 50% – so the rich highly-paid folks who had enough to live on and were collecting 10%,wound up with 5%. But we month-to-month retail and support employees who were scraping by with 1% stock options received only 0.5%.
Fair would have been to cap the stock shares at whatever percentage point, granting those at the bottom their full share, and those at the top their best cut.
Ron Johnson has profited at the expense of myriad lesser employees. He is not the genius his wealth would have you believe. But so goes Apple, so goes the world….
Dell investigated by SEC as well, all the way back to 2002!
http://news.com.com/Dell+delays+quarterly+report+due+to+SEC+probe/2100-1003_3-6114100.html
As long as they’re hassling Apple the bigger fish have more time to cover their tracks.
Right, Redmond?
Screw the trolls. The SEC investigation of Dell is nothing like the investigation of Apple. Dell is in trouble for cooking the books on issues not related to backdating. Conflating these very different issues is dishonest.
“The markets won’t like that. I’ll be looking for Apple stock to drop Monday.”
The stock option scandal has already been figured into the current stock price.
Many other factors to consider when making judgements about what the stock will do on any given day.
Even if it does drop, probably is not as a result of this story.
.
The fact remains that if something were to happen to Jobs stock-related or otherwise ie health. Apple stock will take a big hit. I don’t like it, I have my savings in it but it is a reality that any Apple stock holder has to be aware of it.
Anyone remember Enron? As soon as Ken Lay died the whole affair was forgotten. As if one man alone was completely responsible for bilking the government and stockholders of billions of dollars. Did anyone go to jail over it? I don’t think so (but I could be wrong). Certainly the guilty parties involved were never brought to justice.
I don’t think white collar crime is punished unless there is absolutely no other way to excuse the abuse. So all this about backdating and options will go quietly into the night – at least until a suitable scapegoat is found to blame it all on. I just hope that won’t be Steve Jobs, who is in my opinion, the greatest CEO in the world.
“Certainly the guilty parties involved were never brought to justice.”
“Anyone remember Enron? As soon as Ken Lay died the whole affair was forgotten”
That’ll be a great relief to Jeff Skilling, since if what you say is true they’ll probably let him out of jail tomorrow rather than in 20 years time.
I don’t think Enron is forgotten in any way, shape or form, except among the financially illiterate. It’ll be a case study for MBA students for decades to come.
As for Ken Lay, he got off on a technicality, because he died while the case is under appeal, the case was dismissed. However dying is a pretty strong step to take to avoid a criminal conviction.
Are you suggesting that Steve Jobs die in order to sort out this problem?
Are you suggesting that Steve Jobs die in order to sort out this problem? – howIgnorantCanOnePersonBe
Bite your tongue and never speak of such things again!
I stand corrected. There are now exactly Two scapegoats for Enron. How proud I am of the American Justice System.
Oh gee, another backdating exposé by the Merc. It must be… Sunday.
Nothing to see here, folks. Move along.
sometimes i think the government is doing all this to sidetrack the admistration dealings with there own war cost and money that is unaccounted for. There is the real story
@ChrissyOne
Yeah, it’s Sunday alright. LOL
Great post, you rock!!
“Two scapegoats for Enron.”
Look up the definition of scapegoat. It is somebody who is punished for the crimes of OTHERS. Clearly not the case here.
How about the Natwest Three (not convicted yet), and of course Arthur Anderson, while the firms conviction was overturned on appeal, the firm was destroyed, as was Enron itself.
There are still hundreds of outstanding lawsuits.
The Sarbanes Oxley Act passed largely based on the Enron outcry, and has produced the largest change in attitudes of CEOs to malfeasance in decades because of the penalties it provides.
So despite what you may think, the legal system has reacted strongly to this.
However Steve comes from an earlier era and apparently was too used to dipping his hand into the Apple piggy bank to give it up.
All products are being delayed at apple as a result of the stock scandel at Apple.
Only steve can make decisions at Apple, he gives the stamp of approval on everything.
Total control of every detail.
He is so wrapped up in the potential idea of doing slammer time for his total control of the (repeated) stock options swindle (at Apple and Pixar) that everything at apple is delayed and postponed.
Within the halls of Apple Steve is a god who can do no wrong and is never questioned. Outside the halls is SEC reality.
On another thread I was bashed for making a sarcastic comment about the poor financial literacy that is often demonstrated on MDN. My point was just proven again.
Montex said: “Anyone remember Enron? As soon as Ken Lay died the whole affair was forgotten. As if one man alone was completely responsible for bilking the government and stockholders of billions of dollars. Did anyone go to jail over it? I don’t think so (but I could be wrong). Certainly the guilty parties involved were never brought to justice.
“
Ant then: “I stand corrected. There are now exactly Two scapegoats for Enron. How proud I am of the American Justice System.”
Meanwhile, a simple wikipedia search returns:
On May 25, 2006, the jury in the Lay and Skilling trial returned its verdicts. Skilling was convicted of 19 of 28 counts of securities fraud and wire fraud and acquitted on the remaining nine, including charges of insider trading. He was sentenced to 24 years, 4 months in prison. Lay was convicted of all six counts of securities and wire fraud for which he had been tried, and he faced a total sentence of up to 45 years in prison.[3] Lay died on July 5, 2006, before sentencing was scheduled. On July 12, 2006, a potential Enron witness scheduled to be extradicted to the US, Neil Coulbeck, was found dead in a park in north-east London.[4] The US case alleges that Coulbeck and others conspired with former Enron CFO Andrew Fastow.[5] All told, sixteen people pleaded guilty for crimes committed at the company, and five others, including four former Merrill Lynch employees, were found guilty at trial. Eight former Enron executives testified, the star witness being Fastow, against Lay and Skilling, their former bosses. [6]
It’s fine to have an opinion, but at least get the facts you are basing it on correct.
wikipedia sucks…
“The markets won’t like that. I’ll be looking for Apple stock to drop Monday.”
It’s Monday morning. AAPL is up $1.25+.
So much for your theory.
There have been NO options backdating indictments. There will be NO options backdating indictments. Why? Because it wasnt illegal. The ones being indicted are being indicted for fraud, altering dates, not backdating them. Stricktly speaking, Mercury followed an open process for dating their options, no documents altered, none hidden – most of the other companies involved did the same. Its ONLY when the processes a company has is subverted that a problem may exist. There are miles between the process most companies used to date their options, and actual fraud. But the newpapers like the wall street journal and the mercury news dont care about that, they just like the smell they think they can raise to smear anyone powerful. problem is, their stories are full of errors, and want-there-to-be trouble for those they envy. its pathetic to watch the guys in the press constantly pushing their private agendas rather than actually work to find truth and tell real stories that matter.
“Because it wasnt illegal.”
How freaking naive are you? Lets just make up a board meeting that never happened to grant ourselves all some backdated Apple options. If they’d done it legally and properly there would be no need to restate earnings, would there?
There’s no question that Steve was involved, and knew that options were backdated that much has been admitted by Apple’s own inquiry.
All that remains is to prove that Steve did what he did knowing he was defrauding people.
I can bet that there’s some former Apple execs who would like to cut deals to reduce or eliminate their own jail time by supplying that missing piece of information.
And seriously, anyone who understands Steve and knows what a smart guy and what a control freak he is couldn’t believe any thing but that he knew and understood exactly what he and his minions were doing.
Backdating stock options is NOT illegal. I said nothing about altering board minutes, or whiting out dates or signatures on documents. To be clear, the SEC says an option is backdated if a company makes a list of employees, or identifies a person to get a grant and a number of shares on dates X then selects the grant date in arrears of that time period. That is, if Jobs was approved to get a grant of 1 million shares today, March 07, 2007, and the paperwork were prepared and the date of the grant was set to March 01, 2007 – the SEC says that is a backdated stock grant. It is NOT illegal. The illegality MAY come when the company reports Options Expenses on financial statements for grants dated March 01, 2007 because they contend that since the option is backdated, the reporting is false. This is arguable given that this practice was COMMON among most companies prior to Sarbanes-Oxley and todays climate and awareness.