Oct 04, 2006 (02:10 PM EDT)
Apple Says CEO Jobs Knew About Backdating Of Stock Options
Read the Original Article at InformationWeek
Apple Computer Inc. on Wednesday said an internal probe has found that Chief Executive Steve Jobs knew about some backdating of stock options, but did not benefit from the practice.
In addition, the Cupertino, Calif., company said Fred Anderson, Apple's former chief financial officer, has resigned from the board, saying that he believed it was in the best interests of the computer maker. Anderson served as CFO from 1996 to 2004.
Apple's special committee of outside directors, independent counsel, and accountants found that stock option grants made on 15 dates between 1997 and 2002 appeared to have grant dates that preceded the approval of the grants. Such a practice, called backdating, retroactively grants options on dates when a company's stock price is relatively low, maximizing the potential profits for the option holder.
The internal investigation found no misconduct on the part of any member of Apple's current management team, the company said. Jobs, however, was aware that dates on grants in a few instances were changed, but did not receive, or otherwise benefit, from these grants. The company also said Jobs was unaware of the accounting implications.
"I apologize to Apple's shareholders and employees for these problems, which happened on my watch. They are completely out of character for Apple," Jobs said in a statement. "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."
As a result of the backdating, Apple said it would likely need to restate previous financial statements to record non-cash charges for compensation expense related to the improperly handled stock option grants. The company was reviewing Security Exchange Commission rules to determine the amount of the charges, the resulting tax and accounting impact, and the periods that require restatements.
Apple is not the only tech company to run into problems stemming from irregularities in granting stock options. SEC Chairman Christopher Cox told a Senate panel last month that the agency is investigating more than 100 companies for possible fraudulent reporting of grants. Many of the organizations are tech companies.