Human Capital & Careers

Feds Eye Falsely Dated Apple Options

The false dating increased the value of the grant to chief executive officer Steve Jobs and eventually forced the company to take a $20 million cha...
Stephen TaubJanuary 12, 2007

Steve Jobs is back in the crosshairs. Federal authorities are scrutinizing a grant to Apple’s CEO of 7.5 million stock options that carried a false October 2001 date, reported The Wall Street Journal, citing people familiar with the matter.

The grant was finalized in December 2001, added the Journal, when Apple’s share price was higher.

According to the report, the false dating increased the value of the grant to Jobs, and when it was discovered during an internal investigation, Apple was forced to take a $20 million charge to earnings.

On the final Friday of 2006, Apple stated in a regulatory filing that it had recognized additional noncash stock-based compensation expense of $84 million and restated its financials by a total of $21 million for the three years ending 2006 as a result of improperly dated stock-option grants.

The company also conceded that “the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates” but added that “he did not receive or financially benefit from these grants or appreciate the accounting implications.”

Perhaps the most stunning revelation was Apple’s admission that the approval for an options grant dated October 19, 2001, which had an exercise price of $18.30, was “improperly recorded” as occurring at a special board meeting on October 19, 2001. “Such a special board meeting did not occur,” the company said. However, Apple stressed in its filing that there was no evidence that any current member of management was aware of this irregularity.

The Journal reported that the false documentation was created by Apple attorney Wendy Howell, who the newspaper noted was quietly dismissed last month. According to the paper, Howell insists that Nancy Heinen, Apple general counsel at the time, instructed her to create that documentation. Howell’s attorney, Thomas Carlucci, told the Journal that while at Apple “Ms. Howell acted as instructed by Apple management and with the company’s best interest being paramount.”

Citing a person familiar with the matter, the Journal also reported that Heinen left the company last May for reasons that were unrelated to backdated options. The newspaper added that her attorney, Cristina C. Arguedas, said Heinen did not knowingly engage in any wrongdoing and denied she instructed Howell to falsify documentation. Arguedas reportedly stated that “each of the option grants involving Ms. Heinen was authorized and approved by her superiors.”

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