RealTime IT News

Jobs Knew of Backdating

Apple Computer released results today of an investigation into the backdating of stock option grants, saying it found that CEO Steve Jobs was aware of the practice.

Among the findings from a special committee Apple appointed were 15 dates between 1997 and 2000 that "appear to have grant dates that precede the approval of those grants."

Also, there were "a few instances" where Apple CEO Steve Jobs knew that favorable grant dates had been selected. The committee said that Jobs, contrary to earlier reports, did not receive or otherwise benefit from these grants and was unaware of the accounting implications.

Apple's board of directors formed the committee to look into the issue for three months after Apple first reported to the Securities and Exchange Commission (SEC) in late June of possible irregularities.

Apple's announcement of the backdating practices is among hundreds of cases that federal regulators have launched into how companies dated options.

"I apologize to Apple's shareholders and employees for these problems, which happened on my watch," Jobs said in a statement. "They are completely out of character for Apple. We will now work to resolve the remaining issues as quickly as possible and to put the proper remedial measures in place to ensure that this never happens again."

Apple  also announced that Fred Anderson, its former Chief Financial Officer, has resigned from its board of directors. Anderson, who served as CFO from 1996 until 2004, informed the company that he believes it is in Apple's best interests that he resign from the board at this time, according to Apple.

The company said the investigation raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants. Apple could not be reached for comment. It said it would provide details in a filing to the SEC. Also, the committee said it found no evidence of misconduct by Apple's current management team.

Stock option backdating, the practice of granting shares at prices below the market price on the day of the grant, is designed to ensure recipients get a better price for their shares down the line. Granting stock options below market value is legal if it's fully disclosed to the public and properly accounted for.

Apple is but one of numerous tech companies, many in Silicon Valley, caught up in the scandal related to stock options backdating.

Mercury Interactive, Brocade and Comverse (based in New York) have been among the higher profile companies in the news.

Apple said its independent auditors are reviewing the findings of the investigation. The company said it will likely need to restate its historical financial statements to record non-cash charges for compensation expense relating to past stock option grants. At this time, Apple said it does not know the details of the restating or how much money is involved.

The committee said it worked with independent counsel and accountants to examine more than 650,000 emails and documents in addition to conducting interviews with more than 40 former and current Apple employees, directors and advisors.

Shares of Apple closed up by about $1.30 to $75.38 today but had shed about 66 cents in after hours trading as the announcement came out.