Risk & Compliance

SEC Takes Bite Out of Apple’s Ex-Counsel

Heinen agrees to settle backdating charges for $2.2m. She worked closely with ex-CFO Anderson, who settled for $3.6m last year.
Stephen TaubAugust 14, 2008

The former general counsel of Apple Inc., Nancy R. Heinen, agreed to pay $2.2 million to settle Securities and Exchange Commission stock-option backdating charges.

Heinen agreed, without admitting to or denying the allegations, to terms that bar her from serving as an officer or director of any public company for five years, and to be suspended from appearing or practicing as an attorney before the commission for three years. According to the SEC’s April 2007 complaint, Heinen caused Apple to fraudulently backdate two large options grants to senior executives of Apple — a February 2001 grant of 4.8 million options to Apple’s executive team and a December 2001 grant of 7.5 million options to Apple CEO Steve Jobs. The original complaint also said that sheltered company records to conceal the fraud.

The complaint alleged that as a result of the backdating Apple underreported its expenses by nearly $40 million.

Also in April 2007, former Apple CFO Fred D. Anderson agreed to pay more than $3.6 million to settle SEC charges stemming from his role in the company’s options backdating scandal.

Last year there was much discussion about how deeply Jobs himself was involved with any backdating-related decisions. Apple has maintained that the CEO did recommend “favorable” dates for some option awards, but that he did not “appreciate the accounting implications” of date selection. (The board committee, chaired by former Vice President Al Gore, expressed “complete confidence in Steve Jobs.”) An attorney representing Anderson, however, talked of discussions between the two men in which the CFO advised Jobs that grants “would have to be priced based on the date of the actual board agreement or there could be an accounting charge.” The attorney also said that Anderson had “advised Mr. Jobs that the board would have to confirm its prior approval in a legally satisfactory method,” and that Jobs told Anderson that the board had given prior approval. “Fred relied on these statements by Mr. Jobs and from them concluded the grant was being properly handled,” the attorney said at the time.

The commission said last April that it would not bring any enforcement action against Apple itself, citing the company’s “swift, extensive, and extraordinary cooperation” that included prompt self-reporting, an independent internal investigation, the sharing of the results of that investigation with the government, and the implementation of new controls designed to prevent the recurrence of fraudulent conduct.

Heinen was senior vice president, general counsel, and corporate secretary at Apple. In that position, among other things, she had responsibility for overseeing Apple’s legal group and preparing and certifying the minutes of Apple’s board and its committees. Heinen left Apple in May 2006.