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Steve Jobs cooking options books?

December 29, 2006

Well, who’s had a better year than Apple CEO Steve Jobs? Looks like it could end on a sour note…The Drudge Report is breaking news of a controversy involving Jobs, stock options and some falsified records.

Here’s the report from the Financial Times web site and at MSNBC:

Steve Jobs, chief executive of Apple Computer, was handed 7.5m stock options in 2001 without the required authorisation from the company’s board of directors, according to people familiar with the matter.

Steve JobsRecords that purported to show a full board meeting had taken place to approve Mr Jobs’ remuneration, as required by Apple’s procedures, were later falsified. These are now among the pieces of evidence being weighed by the Securities and Exchange Commission as it decides whether to pursue a case against the company or any individuals over the affair, according to these people.

News of the irregularities, which is expected to be revealed in a regulatory filing by Apple before the end of this week, will add to pressure that has been growing on one of Silicon Valley’s most highly-regarded companies since the middle of 2005.

Apple is among more than 160 companies that have owned up to stock option backdating – handing options to executives and other employees at exercise prices that were set in hindsight at favourable levels – a scandal which has led to the departure of a number of chief executives.

The latest revelation is likely to add to questions about Apple’s disclosures about its internal investigation into the backdating issue. In October, the company largely exonerated Mr Jobs over the matter, saying that while he had been “aware” of the backdating “in a few instances”, he “did not receive or otherwise benefit from these grants and was unaware of the accounting implications”.

According to an Apple filing in 2002, the options under review were handed to Mr Jobs in October 2001, at an exercise price of $18.30 a share. However, the purported board authorisation was dated near the end of the year, suggesting that the benefits were both not properly authorised and were backdated. Mr Jobs later surrendered his options before they were exercised, implying that he did not gain any direct benefit from them. He was later given a grant of restricted stock by the company instead.

Apple’s lawyers have briefed people involved in the case on the findings of the company’s internal review of the matter, though it remains unclear how much detail will be included in the filing.

[UPDATE: The AP is reporting that Apple’s own internal investigation has turned up no malfeasance by current management. From the AP report:

SAN JOSE, California – Apple Computer Inc. said its investigation of stock-option grants found no misconduct by current management, but it did find that Chief Executive Steve Jobs recommended or was aware of the selection of some favorable grant dates.

However, Apple said Jobs did not financially benefit from the grants and the special committee that investigated the company said it has “complete confidence” in the CEO.

Its options mishandling will result in an additional noncash charge of $84 million, the Cupertino, Calif.-based company said Friday. In its full-year financial report filed with the Securities and Exchange Commission, which was delayed due to the options probe, Apple said earnings for fiscal years 2006, 2005 and 2004 will be lowered by $4 million, $7 million, and $10 million respectively.

Stock prices rose 4 percent in pre-trading on the news. The report added that the practice of manipulating option dates isn’t illegal, but has to be noted for the SEC, which it was not in this case…thus the corrections.]

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One Comment
  1. December 27, 2006 11:45 pm

    It seems Jobs got caught with his hand in the cookie jar? I sure hope this doesn’t go like the Martha Stewart case went.

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