More charges likely in stock options backdating cases

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.

Related articles:
SEC won’t bring charges in all options backdating cases – February 12, 2007
Report: Steve Jobs signed off on Pixar deal with backdated options for Lasseter – February 10, 2007
Apple CEO Steve Jobs questioned in options backdating probe – January 23, 2007
Lead prosecutor in Apple options investigation leaves fed post to join private law firm – January 22, 2007
US Attorney Kevin Ryan resigns: What it could mean for Apple – January 18, 2007
Steve Jobs worth $20 billion to Apple Inc. – January 17, 2007
Report: Apple axed lawyer who worked on Steve Jobs’ stock-option grant – January 05, 2007
RUMOR: Steve Jobs will take leave of absence from Apple Computer – January 05, 2007
Apple CEO Steve Jobs getting special treatment in options backdating scandal? – January 04, 2007
Could Apple thrive without Steve Jobs? – January 04, 2007
Apple stock-option fallout: investor lawsuit and twin U.S. gov’t investigations – January 04, 2007
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
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


  1. 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.

  2. 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….

  3. “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.

  4. .

    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.

  5. 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.

  6. “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?

  7. 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.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.