SEC Still Looking Into Jobs?

Even if the SEC decides Jobs did something wrong, would Apple can him?

I would think not...

http://www.mercurynews.com/mld/mercurynews/16452862.htm

U.S. attorney opens probe into Apple options rigging

By Troy Wolverton, Therese Poletti and Mark Schwanhausser
Mercury News

The U.S. Attorney's Office said late Friday that it has opened a criminal investigation into the stock options backdating scandal at Apple.

Luke Macauley, a spokesman for the U.S. Attorney's Office in San Francisco, declined to give details on the investigation. But a source familiar with the matter told the Mercury News on Friday that included in the probe is an option grant given to Apple Chief Executive Steve Jobs in 2001 that ranked among the largest in corporate history.

...

Apple has argued that Jobs did not benefit from any backdated options because the company canceled both the 2000 and 2001 grants. However, Apple replaced the grants with 7.5 million shares of restricted stock, of which Jobs still holds about 5.4 million shares currently worth about $511 million.

Apple described the trade at the time as an ``exchange.''

`` `In exchange for:' Those three words are pregnant with meaning,'' said compensation expert Graef Crystal. ``For them to make the statement that he surrendered the options and never received a benefit is so duplicitous, so mendacious, that everything they have to say is colored, in my mind.''

Patrick S. McGurn, director of Institutional Shareholder Services in Rockville, Md., on Friday called for Jobs to disgorge $20 million -- the amount of the accounting charge Apple took for the 2001 grant.

``It really is cruel and unusual punishment for the English language to try to come up with language that would indicate that he did not benefit from the award he received,'' said McGurn. ``Clearly, those awards were ultimately exchanged on a roughly value-for-value basis.''

...and this is in Apple's hometown newspaper...which usually prints stories gushing about how wonderful every Apple announcement is...

Can someone please explain to me in layman's terms (I'm only 15) what basically is happening with the Apple stocks and Steve? I've been ignorant thus far, but I'd kind of like to know what this is all about.

Can someone please explain to me in layman's terms (I'm only 15) what basically is happening with the Apple stocks and Steve? I've been ignorant thus far, but I'd kind of like to know what this is all about.

Apple paid Steve with stock (rather than paying cash), since options have traditionally been viewed as a motivational tool - salary becomes dependant on performance rather than fixed.

Some stock was issued with a recorded date earlier than it was issued. Because value was rising, Steve was guaranteed to make more money. This is bad. Very bad. Criminally bad.

Anyway, investigations are coming from every which angle. This has both Apple and potentially Steve in a corner.

Company lawyers owe their duty to the company, not any individual. When lawyers are provided to higher management, you still run the risk of a conflict of interest (the company pays, but the individual receives the benefit - even at the expense of the company). It is always (well, I shouldn't say always, but I can't think of an exception) advisable to have your own counsel. I don't know why everybody seems to make a big deal about this, or why it was even mentioned in the article.

That should be a basic primer and reading other articles and news should get you the rest of the way, but if you have more questions, feel free to ask.

Can someone please explain to me in layman's terms (I'm only 15) what basically is happening with the Apple stocks and Steve? I've been ignorant thus far, but I'd kind of like to know what this is all about.

I hear ya :)

Steve's bosses is the Apple Board of Directors. They are who decides what kind of money or other compensation to give him. In the case of Steve, he only gets $1 per year in salary, but gets a lot of Apple Stock as other compensation for his work as Apple CEO. The stock/stock options that he receives are worth well in the millions.

What happened in 2001 was that Steve and Apple's Board sat down and for a couple of month's started to hammer out a deal that would give Steve the largest stock option grant in company history. A couple of problems happened during this time.

a) someone claimed that a board meeting happened that didn't
b) the options were dated by the time when negotiations began, rather than when they finished.

When negotiations began, Apple's stock was lower than when they finished. So, if they granted the stock based on the price of when negotiations began, Steve would have made instant money. However, you can't do that. You have to date the stocks based on when they are granted, not on some arbitrary date.

In the end, Steve decided not to exercise his stock options, and rather traded them in for something else. Thats why Apple's internal investigation said "he never profited from the grant he received". However, the fact that he received a grant at all, and the fact that a board meeting was falsified in the process, is what has the SEC so concerned.

Is anyone *really* surprised by this? I mean, how could S.Jobs NOT know about the improper grants... isn't he on the board of directors... and shouldn't he be one of those giving the O.K. for the grant? The SEC just got a huge report from a company that falsified stock records, which attempted to convey that they were making a full confession for their wrongdoing... and offer up $84 million. A measley $84 million.

If I was the SEC, I'd be curious too.

-Clive

Okay s he goes to jail then comes back and pulls a Martha Stewart. Either way whether he is guilty or not i think they are going to use him as an example.

Some stock was issued with a recorded date earlier than it was issued. Because value was rising, Steve was guaranteed to make more money. This is bad. Very bad. Criminally bad.

Apple is free to give the Steve options at whatever price they want. Even today, with the price around $85, they could give him options at $1 - with an instant "paper profit" for Steve of $84.

What Apple can't do, however, is to claim (for securities and tax purposes) that the cost to Apple of these options is $1 - the true cost is the $84 difference.

In the backdating scandal, this "erroneous cost" is exactly the problem - by setting back the date of the grant, Apple claimed a cost that was less than the true cost.

To make matters worse, there was deliberate falsification of records - claiming that a meeting had occurred at the time of the grant, when in fact no such meeting happened.

The falsified meeting makes it very hard for Apple to claim that this was a simple mistake - it shows a conspiracy to commit fraud that the courts find quite compelling.

Picked up on Cnet:

http://news.com.com/Reports+Jobs+in+the+hot+seat+over+option+backdating/2100-1047_3-6152437.html


There are links to quite a few more stories at MacSurfer's Headline News.

Is anyone *really* surprised by this? I mean, how could S.Jobs NOT know about the improper grants... isn't he on the board of directors... and shouldn't he be one of those giving the O.K. for the grant? The SEC just got a huge report from a company that falsified stock records, which attempted to convey that they were making a full confession for their wrongdoing... and offer up $84 million. A measley $84 million.

If I was the SEC, I'd be curious too.

-Clive

Of course. Say it all out loud, and you realize how silly it sounds that Jobs could be cleared of all wrongdoing by an internal investigation at :apple: . The SEC is right to suspect Jobs of knowing what was going on, although it is certainly possible that he didn't know anything as :apple: claims. But the SEC would be extremely neglectful if they simply took the company's word for it - they need to perform their own investigation and decide for themselves.

Think if this were Ballmer and Microsoft. How many here would believe the Ballmer knew nothing, based on only what Microsoft said.