1.12.07: Criminal and civil investigations into Jobs option grant
By Richard Koman - January 12, 2007
The US attorney's office and the SEC are investigating Apple's backdated grant of 7.5 million options to Steve Jobs in Decemer 2001, The Wall Street Journal is reporting today. There could be both criminal and civil sanctions against some of the players, including two former company lawyers.
WSJ: US Scrutinizes Grant to Jobs
Apple attorney Wendy Howell apparently created false documentation stating that the grant was made to jobs at a meeting on Oct. 19, 2001. That's what Apple told shareholders in a 2002 proxy statement. But the grant wasn't actually made until December - and the October grant meeting never happened. The price of Jobs' grant was backdated to a date when Apple's stock price was 20 percent lower.
Howell has been fired, Thomas Carlucci, Ms. Howell's attorney, said that while at Apple "Ms. Howell acted as instructed by Apple management and with the company's best interest being paramount."
In point of fact, Howell says, it was Nancy Heinen, Apple's longtime GC, who recently resigned, who ordered her create the docs. Heinen denies it and says that all grants were approved by superiors.
The SEC wants to talk to Howell, Heinen and Fred Anderson, former CFO, who did resign under a backdating cloud.
Under accounting rules, no grant is actually made until final terms, including price, are settled and final approval is given by a company. Apple has said that its board "originally approved" the grant dated in October 2001 on Aug. 29 of that year when the stock was trading at $17.83. But according to a person familiar with the situation, Mr. Jobs wasn't satisfied with the terms of the grant in August and negotiations continued for months. Apple has said the grant was finally authorized by the board on Dec. 18, 2001.On that date, the stock was trading for $21.01. The grant, however, was backdated to Oct. 19, when the share price was $18.30. Apple hasn't disclosed any details surrounding the decision to backdate the grant. Two people familiar with the matter say the October date coincided with a meeting of the board's compensation committee. The committee, however, didn't ISSUE the grant at the meeting, they say. According to Apple's practice, the full board was required to approve stock-option grants to the chief executive.
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