Apple corporation stock option backdating scandal
(Full deposition embedded below) Jobs explains his reasoning for why he asked the board for mega grants of options for both himself and his top executives, but claims ignorance of the mechanics of how that was done after the board approved the grants themselves. (It was the falsifying of board minutes for a meeting that never occurred, not the backdating per se, that got Apple’s former general counsel Nancy Heinen into hot water with the SEC—this deposition was for a case against her). Apple initiated this voluntary independent investigation after a management review discovered irregularities in past stock option grants.• In a few instances, Apple CEO Steve Jobs was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications.• The investigation raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants.The company will provide all details regarding their actions to the SEC."I apologize to Apple's shareholders and employees for these problems, which happened on my watch.CUPERTINO, California — October 4, 2006 — Apple® today announced that the special committee of its board of directors has reported its findings after a three month investigation into Apple’s stock option practices.The special committee of outside directors, together with independent counsel and accountants, examined more than 650,000 emails and documents, and conducted interviews with more than 40 current and former employees, directors and advisors.
He was the first of more than a dozen executives who faced criminal prosecution in the wide-ranging scandal. In fact, some of those employees explicitly told the FBI they knew about the shenanigans.Even Apple's Steve Jobs came under scrutiny from the feds.Reyes' defense was that he signed off on the backdated options without intent to deceive, and he thought the company's finance group had properly disclosed the backdating in the annual reports.Stock option backdating has erupted into a major corporate scandal, involving potentially hundreds of publicly-held companies, and may even ensnare Apple's icon, Steve Jobs.While the focus of the Securities and Exchange Commission ("SEC") centers on improper accounting practices and disclosures, thereby violating securities laws, a major yet little explored consequence to the scandal involves potentially onerous taxes on those who received these options.