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Apple Investigated Over Stock Options
blamanj writes "Apple has joined the list of over fifty companies (most in Silicon Valley) that possibly mishandled stock options by backdating them. The technique is not illegal, but it can cause a company to improperly deduct employee compensation expenses and result in an underpayment of taxes. So far, Apple is conducting the investigation itself, but it has notified the SEC."
Boring....
Religion for nerds. Stuff that really matters
So, Apple investigates itself over something that isn't exactly illegal?
Funnypics
Apple: officially "beleaguered" again.
And now, a PSA from David Lynch.
Slashdot headline creation in a nutshell...
MustardMan decides to take his dog to the vet to check for diseases.
Slashdot headline: MustardMan's dog being investigated for deadly pathogens!
This headline is complete BS. Apple's own internal auditors found something that might be an issue, and Apple reported it to the SEC themselves.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Apple is one of 57 companies being investigated. Who are the other 56 companies? No links, no nothing.
Stock options in the Valley are definitely a problem, and if Apple screwed up, they deserve whatever they get. However, they did inform the SEC, so it seems a bit early to get out the stakes and holy water.
Read the EFF's Fair Use FAQ
deserves to be on slashdot.
what next, a deep look inside Apples accounting practices? Followed by an investigative report on which urinal cakes Apple uses?
None of that is News for Nerds, or stuff that matter..
The Kruger Dunning explains most post on
Except he did not leave his children such things and encouraged the inheritance tax for the same reason: his belief that the wealth of the parent should not excuse the child from work for life.
Reporting it to the SEC seems to be more of a CYA move than anything else.
The Christian Right is Neither (Christian nor right). See: Matthew 23, Matthew 25, Ezekiel 16:48-50
Man, I really need to start trusting myself.
But if I did, wouldn't I'd prove myself wrong, this making myself untrustworthy ? (it aint easy being insane, but sombody's gotta do it)
Wanna fight ? Bend over, stick your head up your ass, and fight for air.
Link
According to The San Francisco Chronicle:
"Regulators are investigating whether companies broke securities and tax laws by backdating stock-option grants to coincide with the lowest possible price. The practice of backdating is drawing scrutiny because it maximizes the amount of money executives can make in exercising options."
It seems like plenty of As need Cing, but I think it's way to early to say "the technique is not illegal".
In light of recent events, I think it's difficult to call Warren Buffet greedy or pathetic. As a self-made man, he lives remarkably frugally, and is exceptionally philanthropic. For more information, check the Wikipedia article on him.
http://www.TheGamerNation.com/Forums
Yes, off-topic, etc., but there's really no other place to say this: We need better editing of story submissions. Apple is not being investigated, Apple is reviewing its own practices, and it's not even clear that what they're looking for is actually illegal. The summary even goes on to say that Apple notified the SEC of its investigation itself. So why the sensationalist headline?
My proposal: let's tag this story as pleasefixthisheadline. The editors rarely respond to comments, so maybe having tags that show up on the front page will get their attention.
And you know what they say about a cowboy with slight hands, don't you?
Sigh...a six-word subtitle, and it contains a typo. (It's sleight. sleight of hand, not slight of hand.)
Viper is the preferred editor of the Emacs operating system.
You know, I'd put my entire Karma on the line to say that if this was M$, instead of "Yawn, is this news?" posts, this entire story would be "M$ Anti-trust! Evil! Screwing their workers!" posts.
Your hair look like poop, Bob! - Wanker.
If this were IBM, Microsoft or even Red Hat, all the usual slashdot mac-zealots would be calling for their heads.
No, if any of those companies found a problem in the course of their own audits and reported it as Apple has, it would be just as much of a non-event as this is.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
As something that is primarily a pointing device, mice should have six mouse buttons, not two. It only makes sense.
$1 salary ... plus tens of millions in backdated stock options. How altruistic.
You forgot about the airplane.
Just sayin'.
I'm a linux fanboy, and even I know this is something that just has to happen for a lot of companies.
Apple, Goole and others lobbied hard against the new FASB rules that makes this step necessary; without them, these companies could continue to artifically inflate their bottom lines.
How it works:
The old FASB rules didn't force a company to expense stock options. As such, they didn't come out of their bottom lines.
Meanwhile, whenever an option was exercised, the company would get a tax break for the 'expense'.
In other words, a company could spend money without noting it, and get a tax break if it was converted to cash. Nice little loophole there. It's essentially tax fraud without the illegalness. It was a great boon for the internet startups of the mid to late 90's, since they could have a very large pile of capital they could pay their emplyees with without it looking like they were diminishing their capital.
Under the new rules, stock options must be written down as an expense. The tax break still exists, but now it doesn't inflate the stock price, leaving it more balanced.
Option is expensed. Stock price goes down.
Option is exercised. The added demand and tax break brings the stock price back up.
110100 1101000 1101000 1100110 0 1101111 1101000 1100011 1
...and in other news, over fifty unnamed companies are being investigated in some manner for possibly doing something like what Apple might have done.
Back to you, Ted...
RTFM; please, I beg you.
When the employee exercises a stock option they are paying the company for the share. If the company back-dates an option to lower the strike price for an employee, the employee pays less for it.
Scenario:
The employee makes a bigger profit, the company loses. This is the worst
side-effect of back-dating stock options. You're cheating the other shareholders.
Accuracy lacking on this one:
Options that went to the CEO were cancelled, never used.
Get your facts straight, dude.
"Except he did not leave his children such things"
0 177jun26,1,3667425.story?coll=chi-news-hed
He most certainly did.
http://www.chicagotribune.com/business/chi-060626
"The investor also is setting aside stock valued at $3.2 billion to provide about $1 billion to organizations headed by his three children."
Obviously that inheritance tax is only for us peasants whose children do not have their own tax shelter organizations to funnel money to.
Tax and accounting are two different things. (Maybe they shouldn't be, but that's a different story.) The tax issue you're discussing isn't fraud, it's the way the compensation taxes are supposed to work. There is a different tax issue related to backdating. I will discuss it below and I suppose it could be described as fradulent.
Suppose an option gives an employee the right to buy $100 shares for $20. The right to do this is worth $80. When the employee exercises, the company gets a deduction for $80 and the employee is taxed on $80 of ordinary income. This is the standard treatment for compensation: a tax on one side is a deduction on the other. A payment of $80 cash to the employee yields the same treatment (tax deduction for the company, tax for the employee).
The *accounting* treatment under the old rules was definitely screwed up by failing to *ever* recognize expense. However the IRS didn't make the same mistake.
There is a different and more subtle tax issue that arises with backdating. Under the 1993 Clinton tax act, compensation in excess of $1 million is not deductible unless it is performance related. There is a possibility that backdating will lead to the option grant being deemed "not performance related" (since it has a baked-in gain due to backdating). In this case the company will lose the deduction when the option is exercised. The employee would still have to pay taxes. If an executive had exercised $100 million of backdated options, the company could lose the deduction on this amount. When news stories refer to tax issues related to backdating, I think this is mainly what they're talking about.
To equate giving wealth to your children, and giving wealth to the charitable foundations your children run is simply foolish.
It's also foolish to assume that an unnamed "charitable foundation" only known as being "run by" someone isn't just their own personal piggybank.
"Scientists don't change their minds, they just die." -- Max Planck
..because it's Apple doing it! Go Apple! Just to show they are pure in every way because they even investigate themselves when they aren't even in trouble.
Sig: I stole this sig.
No they probably aren't, if you think of millions of 'facts' and Excel 'cells.' But the SEC has only recently decided to maybe change the rules of compensation disclosure (which includes the valuation of stock options, the 'window' in which a grant can be dated, etc). And they're only looking at the top 5 execs in a company, so, the million Excel cells aren't exactly on the table.
The SEC is always 'behind the curve' when it comes to rule changes. Why? Not because they are stupid, but because they are reacting to events, rather than being proactive.
For one thing, they aren't concerned with fully-detailed reporting of ALL of a company's employee remuneration, insurance, options, disclosure agreements, partial ownership of company IP, etc. They are concerned with... since 1934... the big guys. The insiders. So, they first wrote rules to prevent execs from trading in and out of a company's own shares in a 6-month timeframe. This was a popular activity at one time. The 1934 law was written to 'prevent' the recurrence of another 1929-1933 disaster.
They have been playing 'catch-up' ever since. In '87-88, they instituted rules to suspend program trading, in the event of a precipitous drop in the index, to 'prevent'another scenario such as October '87, when people couldn't get in and out of a trade, unless it was made 'at the market' (disastrous when prices are falling faster than one's broker can get a confirmed execution). It worked fine... as long as there was no precipitious drop. A 100 or 200 point drop would happen, the rule would 'kick in', and things settled down in the trading of affected stocks...
BUT, it didn't do any good when, in the late 90s, mutual fund guys just turned around and sold off huge blocks of 'healthy' stocks, in order to cash out all those clients who were riding the tech sector into the basement, and could simply call an 800-number and say, "Move me into Money Markets." The fund managers lookked at the Bloombergs, saw Yahoo, and all the tech things tanking, and sold GE, Banks, etc... At which point everyone headed for the exits. The 'rule', itself, contributed to the tech sector's woes spreading to all the other sectors. It was pretty ugly.
Meanwhile, back to execs... they had passed insider trading rules, and company's came back with a sort of 'programmed' trade setup for execs: A guy could say, in writing, that he was going to unload certain numbers, or percentages of holdings at a certain date in the future, and that absolved them of any hint of insider trading, BUT, after the SEC signed-on to the program, the guys in the companies decided they could set trades in advance that 'just happened' to coincide with earnings reports and whatnot, and then cancel their sales... result, the stocks themselves would get a double-boost from a good earnings report AND the news that x-number of guys at XYZ Corp decided to 'hold' their stock instead of taking profits on options. What really happened was the guys saw a huge increase in the paper value of their holdings, their equity was up, their lines of credit were better, with more collateralized equity behind them, etc.
So, the SEC is proposing to tighten up, again. It's a game. Apple, like the other 50 or 60 companies, probably got tipped by the SEC, themselves, that 'either you look at your pricing/dating, or we will.' Nobody, on either side of the game, wants to monkey with things, like, say, tightening up too much, negatively influencing the 'little guy' investors that really are the bread and butter of the whole Game, itself...
so you have this little drama, to avoid the uncertainty that immediately follows a close call or a minor disaster. If there was no human greed, no 'rocket scientists' coming out of the schools to show accounting and counsel, a 'new way' to do the 'old same thing', we wouldn't heed regulation, but, on the othe