Posted by Richard Koman - April 23, 2007
The SEC is getting ready to charge Apple's former GC, Nancy Heinen, with securities fraud in Apple's option backdating scandal, The Mercury News reports.
The SEC is looking into Heinen's role in awarding Steve Jobs stock options but also at a second round of grants in which various executives, including Heinen herself, profited from backdating.
Heinen approved setting a grant date to Jobs in October 2001, rather than December 2001 when the grant was finalized and the price was higher. She claims that she thought this was legal at the time. More troubling - and harder to justify - are accusations that she instructed a lawyer working under her, Wendy Howell, to create bogus documentation for an October board meeting at which board was said to have approved the grant to Jobs. That meeting, of course, never happened.
When the board finalized the Jobs grant shortly before Christmas 2001, board member Arthur Levinson, Genentech's CEO, sent an e-mail saying the deal with Jobs was done and instructed Heinen to document the Oct. 19 date, according to three people familiar with the grant.
Heinen, these sources say, then e-mailed Wendy Howell, an in-house Apple lawyer who ordinarily documented stock options, instructing her to handle the Jobs documents. From there, the accounts of Heinen and Howell differ, according to sources familiar with their versions.
What is not disputed is that Howell wrote phony meeting minutes to show the board approved the Jobs grant on Oct. 19, 2001. Howell maintains she was instructed by her superiors to create the meeting minutes, but Heinen denies knowledge of the false minutes, although she signed them in her role as the board's corporate secretary, according to sources familiar with both accounts. Two people familiar with Heinen's account say she regularly had stacks of minutes to sign, and didn't scrutinize the Howell minutes.
The SEC is also readying a case against former CFO Fred Anderson.
The Mercury's sources report that Jobs also approved a January 2001 grant for executives including approved by Jobs for top Apple executives, including Heinen and Anderson.
Sources say Jobs in late December 2000 approved the options. Under Apple's options program at the time, the options would normally be dated the following Tuesday, Jan. 2, 2001. But the grant wasn't finalized until Jan. 31, two people familiar with the case say.
In the interim, Heinen and Anderson discussed an appropriate date for the options, sources say, and decided that it would appear improper to use the Jan. 2 date, when the shares closed at $14.80. These sources say Heinen and Anderson settled on Jan. 17, when the stock was at $16.81 a share, believing it was proper to drag the date forward from Jan. 2 because the price was lower. But the options were backdated to that Jan. 17 date on Jan. 31, when the stock was at about $21 a share.
Heinen will argue that because she chose a higher price than Jan. 2's price, she wasn't profiting from the date choice. Another point of view might be she didn't want to look greedy.
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