1.4.07: Lawsuit, investigations will dog Jobs for awhile
Apple faces a shareholder lawsuit and two federal investigations into its stock option practices, Jessica Guynn reports for the SF Chronicle, as CEO Steve Jobs and his team try to stay focused on Macworld next week.
Juice in the suit: Apple granted a slew of option in 1997 just before announcing a landmark $150 million bailout of the company by Microsoft. The deal was Jobs' first coup as the "interim" CEO. The suit says that stock option funny business started in the mid-90s, soon after Jobs' return.
Meanwhile the SEC and the US attorney's office are looking into the company, but crisis management expert Eric Dezenhall says the company played it smart with its unabashed support of Jobs.
"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."
The attorney in the suit, Mark Molumphy, a partner at Cotchett, Pitre, Simon & McCarthy, is also interested in stock option behavior at Jobs' other company, Pixar.
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.
"The Pixar angle is one of great interest to us," Molumphy said. "It raises even more red flags."
"Given the magnitude of the backdating, the people involved and the possibility of faked meetings to approve (options), I believe it's now a coverup case," Molumphy said. "It's hard to argue you didn't understand what you were doing was wrong when people at the highest levels of the company were recommending the dates."