SAN JOSE, Calif. (AP) — Apple Computer Inc. gave the most detailed account yet of its stock-option practices yesterday, clearing Chief Executive Officer Steve Jobs and other current executives of any misconduct. Yet it still is not clear who was responsible and how much Mr. Jobs was involved.
And while Apple has concluded its own probe into the backdating scandal, Mr. Jobs and others are not necessarily cleared of any civil or criminal actions. The Securities and Exchange Commission and the U.S. Attorney’s Office have not commented on whether they are investigating the matter.
Apple said yesterday it has given the results of its review to the federal agencies and responded to their “informal requests” for documents and additional information.
The Cupertino, Calif., maker of IPod portable media players and Macintosh computers is among the most prominent of some 200 companies under scrutiny for backdating stock options. It is a widespread practice, especially in Silicon Valley, that involves pegging stock options to favorable grant dates in the past to boost the recipients’ award.
The manipulation itself is not necessarily illegal, but securities laws require companies to properly disclose the practice in their accounting and settle any charges that may result.
In a filing yesterday with the SEC, Apple said that Mr. Jobs was aware of or recommended the selection of some favorable grant dates but that he neither benefited financially from them nor “appreciated the accounting implications.”
The company exonerated Mr. Jobs and current management but said there are “serious concerns” with the stock-options accounting actions of two former officers, whom Apple did not name.
Two outside directors — former Vice President Al Gore, who was chairman of the special committee that conducted the probe, and Jerome York, chairman of Apple’s Audit and Finance Committee — said in a joint statement they had “complete confidence” in Mr. Jobs and the senior management team.
Apple acknowledged the backdating of thousands of option grants and restated past earnings — with relatively minor adjustments — because of the probe.
Analysts say the company’s own clearance of misconduct does not provide the final word.
“The question is not merely one of whether Jobs benefited or not, but also one of whether Jobs was involved in the backdating of documents, or providing investors with misleading or incomplete disclosures,” Lynn Turner, a former chief accountant for the SEC, said in an e-mail yesterday. “Apple keeps trying to focus solely on the issue of whether Jobs benefited, which raises an eyebrow as to exactly what his role, as CEO of this company, was.”
Apple said its three-month probe identified a number of instances in which option grant dates were intentionally selected to obtain better prices.
Its investigation reviewed 42,077 stock-option grants made on 259 dates between October 1996 and January 2003. Of those, 6,428 grants on 42 dates were not dated properly, Apple said.
Of two option grants awarded to Mr. Jobs, one was improperly dated Oct. 19, 2001, with an exercise price of $18.03, instead of the correct date of Dec. 18, when Apple shares were trading at $21.01. That stock-option grant was for 7.5 million shares.
Had Mr. Jobs exercised the options, the lower price of Oct. 19 could have boosted his award by about $22 million. Mr. Jobs later surrendered those options with another earlier grant for 15 million shares that was correctly dated Jan. 12, 2000, the company said.
The grant that was dated Oct. 19, 2001, was improperly recorded as having been approved at a special board meeting on that day. That special meeting never occurred, the company said. “There was no evidence, however, that any current member of management was aware of this irregularity,” Apple stated.
Apple has not identified the two former officers, whom Piper Jaffray analyst Gene Munster has already called “the fall people” for the company. Press reports citing unnamed people familiar with the matter, however, have pointed to former Chief Financial Officer Fred Anderson and former general counsel Nancy Heinen.
Apple shares rose about 4.9 percent to close at $84.84 on the Nasdaq Stock Market following the announcement.
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