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Apple Execs Reportedly Faked Options Documents
theodp writes "Federal prosecutors are reportedly looking closely at stock option administration documents that were apparently falsified by Apple execs to maximize the profitability of option grants. While Apple has said CEO Steve Jobs did not profit from the stock-option backdating, Jobs has reportedly hired his own attorney to deal with the SEC and Justice Department."
this seems to be so commonplace now days it's pathetic...
and Apple who always got stolen from of all people.
"Just Smile and Nod." --Huck
Cue the Microsoft in league with the government conspiracy theories.
I think the invisible hand of the market has its middle finger extended
--A wise old fart named SC0RN
What?? Are you saying that Steve Jobs makes more than $1 a year?
Scully: Should we arrest David Copperfield?
Mulder: Yes we should, but not for this.
That like everything at Apple it was very easy to do. 3 clicks and options were faked. That's it!
Apple shares ended up exactly one cent higher today than yesterday, after huge panic selling in the morning.
Guys, do you realise that all of this story is just based on hearsay from some Anonymous Cowards?
Hedge funds?
...need to kill all the lawyers.
Disappointing that Fred Anderson is at the center of this. Anderson did a bang up job as CFO. He created the company's large cash reserves by liquidating unnecessary capital investments (plant), issuing a convertible debenture and selling some of their valuable ARM holdings. Then he managed the investment of those funds astutely enough to make the conversion of those outstanding notes to common stock a huge win for both the company and creditors. That 1999 conversion alone eliminated about two thirds of Apple's long term debt (conversely that means the issue had assumed most of Apple's debt). Really, this guy did an outstanding job. Apple can thank him for their sound financials.
Now it seems the financial genius is another self-serving, crooked corporate scumbag.
It is cowardly, and a betrayal of whatever it means to be a Jew, to act as a white man
-James Baldwin
Taking one for the team once again, because it seems something so clearly in the apple section dare not you know be put there, bad rap and all. I love apple to death but this is some pretty blatant bias.
The purpose of a lawyer is to look after your interests while you conduct your business - they can warn you of impending trouble - and can nip a long drawn out investigation that will result in no arrests or charges right in the budd.
It's stupid to blame someone for seeking protection from abuse.
-GiH
We already know that Jobs had knowledge of and approved of some of the bogus option moves by the company. Sounds like that may just be the tip of the iceberg.
The SEC has been investigating "about 80" companies for this since July. Apple started their own internal investigation, which they're sharing with the SEC. Oh, and it's former employees who are being looked at. Oh, and maybe backdating isn't illegal, it just should be declared.
Take a look here or here.
No folly is more costly than the folly of intolerant idealism. - Winston Churchill
Once again /.'ers are chomping at the bit to slam corporate America, Steve Jobs, etc... Without having read the article. Please RTFA before posting your comments. You only stand to raise the collective IQ of slashdot and make it a more intelligent place to gather.
I'm not fat, just big boned...
"...and Apple who always got stolen from of all people."
Oh, sure, NOW the Government is looking!
Most of the stuff on
Eh? The accusations are that Apple followed what were believed to be legitimate and standard accounting practices at the time. I do not think a headline a case makes. Who exactly got robbed?
If Jobs was aware of the problems but didn't take appropriate action it could still damage the company more than the non-story linked might imply. Essentially, Jobs has been hailed as a hero by fanboys and shareholders alike, and anything significantly tarnishing his tenure might remove some of the aura of invulnerability Apple has acquired in recent years. I don't by any means imply that Jobs' um, job is in danger, but it might complicate business partnerships and other strategic moves that Apple needs to remain competitive. iPod dominance aside, Apple's position is at least assailable, if not so tenuous as it was a decade ago. To reach its growth targets it has to navigate agreements with telecom providers like Cingular as well as convince say, Intel and Toshiba to continue to give it most-favored-nation status. Apple isn't Dell or Microsoft to expect to make demands of suppliers and partners with impunity.
Not yet, anyway, and maybe never, if the next round of initiatives (smart phone, media ventures, etc.) collapses.
Distracting Jobs and blemishing his heretofore immaculate turtleneck might have more consequences than just an easy story for everyone from CNET to AP report and re-report.
I am the one true god. However, as an atheist, I don't believe in myself. I guess I have a self-esteem problem.
No, no, no.
Steve Jobs is a very integrative, honest person and would never do something as bad. After all, Apple's slogan is "Do no evil."
And how could Jobs afford to hire his own attourney with a measly $1 salary? You damn well better believe he's profiting somehow if he can personally hire an attourney.
You know, this year I had a bad year and actually lost money. But I'm still a multimillionaire, and can afford an attorney. Your argument does not hold, idiot.
... and I'm the SEC. Please get in the car.
The price is that executives can no longer spend company money on whatever they wish. Executives cannot arbitrarily set pay. What we have seen in the past twenty years is scam to increase executive pay while simultaneously decreasing exposure to risk, while in the truly private sector, the opposite is true. The stock option is the classic example. It is marketed as a method to align the executives interest with the stockholder interest. If the stock rises, the executive gets rewarded. In reality, just like bonuses, the behind the scene negotiations guarantees the money no matter the state of the company.
In reality, these new breeds of corporations, with their bloated bureaucracy, with no other purpose than to create meaningless work that justifies it's existence, and raise prices and cut research to free enough money to pay for these non productive agents, are indistinguishable from any other massively bloated public entity. The similarities to congress, who wants to vote in a pay raise every year, but can't complete the minimum job requirements like passing a budget, are amazing.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
for new iSteal launch
... that the forged documents were laser-etched on glossy black plastic stationery, instead of being of the usual black-ink-on-white-paper type.
...the iCheat
Maybe we should do some research on this. How would a fucking billionaire, making "a measly $1 salary", be able to afford an attorney? I'm stumped. If you figure it out, let me know.
Backdating options is a legitimate accounting practice? It's never been allowed at any of the places I worked, where more than once I had options issued shortly after a huge aberrant stock spike and thus my option price was set so high that it never became profitable. I would have *loved* to have had them backdated, but had understood it was illegal to do so.
Use one or more of the following: 1.) "We have launched our own internal investigation..." 2.) "We are cooperating with authorities..." 3.) Imply that the offending personnel have long since left the company... 4.) Imply that CEO was unaware of wrong-doing... 5.) Use the phrase "a few bad apples..." Apple can't use #5 (for obvious reasons), but they have used the other four. Sounds about as believable as Tony Snow discussing Iraq...
Actually, this was the case with a lot of the 'corruption' cases that sprang up.
Clinton's Justice Department was noticably lackadaisical about prosecuting or enforcing certain accounting standards (depends on what your definition of 'profit' is, I guess.)
Anyway, when Bush comes into office, with a business background, 'fudging the numbers' is not cool. You either made a profit or you didn't, regardless of what shell offshore companies you bought.
I have always found it curious that on Bush's watch all of these corrupt companies were brought to Justice (especially since Enron had Bush in their pocket, what with them hiring a Clinton official as spokesman) and yet Bush is tagged with fostering this corruption.
I guess you can fool most of the people most of the time.
I don't think Apple did anything other than do what they thought they could get away with (i.e. what everyone else was doing.) Besides, it's not like the rules for Exec Comp valuation don't change every other year (google 'Black Scholes Option Valuation' to get a sense.)
The opposite of progress is congress
Apple did have some rough spots during the second coming of Jobs. I doubt Jobs would have a financial care if Apple tanked because he was still successful with Pixar. But, those other execs may have lost faith in Job's vision and decided to implement plan B. I suspect they developed an immunity to reality-distortion fields due to long term exposure early on. Thus, in those uncertain days during the recession, they decided to to milk those stock options with creative accounting. Though they probably rank up there with the Enron crew, any damage they may have done is neglible. During their tenure, Apple didn't even layoff a lot of people. With Apple doing so well and the replacement of the execs, I see this blowing over with moderate to heavy fines.
As for Jobs, whether he knew or not won't make a hugh amount of difference. Granted, if this had been any other company or he had been someone else, he would already be forced to resign. But, since Jobs is associated with Apple's recent success, I doubt any investor would ask for his head. I don't think they could find a replacement with his charisma, his vision, or his contacts. He is just too valuable.
You don't have to be smart to use a Mac, you just have to be smart enough to buy one
With as much as Jobs likes to chew people out, I'd like to hear how he confronts the execs...
Why buy that? I heard an unsubstantiated rumour that Microsoft might be launching Stock Market Optimiser for Vista some time next year. You'd hate to buy that other product and then become incompatible with the industry standard, now, would you?
I'm scared of numbers that can't be written as a fraction. It's an irrational fear.
'' Backdating options is a legitimate accounting practice? It's never been allowed at any of the places I worked, where more than once I had options issued shortly after a huge aberrant stock spike and thus my option price was set so high that it never became profitable. I would have *loved* to have had them backdated, but had understood it was illegal to do so. ''
A company can give you any number of stock options it wishes, at any strike price it wishes. If the strike price is equal to the share price on the day the options are granted, the company does not have to pay any taxes on the grant. If the strike price is lower, then this is treated as if the company had given you cash, so you have to pay income tax, and the company has to register the difference as a loss. So it was always legal for the company to give you options at the share price at an earlier date, but YOU would have to pay income tax for it.
What is NOT legal is to modify the grant date and so hide the fact that taxes need to be paid.
Jobs has reportedly hired his own attorney to deal with the SEC and Justice Department."
That should prove he's guilty right there. Innocent people don't need no lawyers. they just explain to the judge why it's all a big misunderstandin'.
This is probably a great time to remind everyone that unless you, personally, have paid your attorney's retainer, he is not your attorney. If the lawyers paid by Apple could save Apple a nickle by hanging an innocent Steve Jobs out to dry, they would be obligated to point out that fact to their client, who is not Steve Jobs.
The moral of this is that even if your employer has paid for a lawyer, you still need your own lawyer, even if you really are as important as Steve Jobs thinks he is. Don't depend on your employer's lawyer to defend you. He'll sell you out as soon as it helps his client.
See what I've been reading.
likely since the Government has all of their eggs in the Microsoft basket...
"Just Smile and Nod." --Huck
Aha, thanks for the explanation. That's a much better explanation than I ever got from the plan administrators for some reason.
Color me surprised that a DRM pushing company bent on vendor lock-in employs immoral weasels.
Sometimes at night I imagine the darkness is filled with horrible things with too many teeth, like Julia Roberts.
Damn, that was some ridiculous fanboism. Enron was a blue chip stock, caused the biggest bankruptcy the nation had ever seen, and screwed thousands of employees and shareholders. Applauding Bush's Justice Dept for investigating is like applauding me for pooping after consuming coffee and a bran muffin. If it didn't happen, something was seriously wrong.
Moreover, it was the downfall of Enron that highlighted Arthur Andersen and eventually exposed World Com. It's not like the Justice Dept. was on some sort of corporate crime crack down. They were dealing with the blatantly obvious.
Moreover, before you start cheerleading about "all of these corrupt companies were brought to Justice," I would suggest that you look at current practices for awarding and funding contracts for security, military, and reconstruction projects.
"Things are more moderner than before- bigger, and yet smaller- it's computers-- San Dimas High School football RULES!"
I just want to know if Apple should now be delisted from the list of "Officially Slashdot Sanctioned Companies". It hasn't been a good year for these companies, what with Google rolling over for China, Reiser murdering his wife, and now Apple playing financial dirty tricks. :)
Why should you object to us searching your car if you're not carrying any drugs in it?
Why should you care if we listen to your phone conversations if you're not plotting terrorism?
Why do you own a gun if you're not being attacked right now and don't plan on killing anyone?
Why are you using the psudonym "Orion Blaster" if you have the right to free speech?
Secondly, Steve Jobs hired an attorney, singular. Not "an army of lawyers". Thanks for playing the exaggeration game though.
If some documents have been faked, there must be others. Just like if some music on your PC is pirated, you must have stolen all of it...
Yes, the backdating of stocks, the result of which gave MORE money to executives, caused Apple to be MORE profitable. [rolleyes]
Enron's issues were more than "cooking the books". The media portrays the entire Enron mess as a few guys changing a bunch of numbers in a ledger and a bunch of shredding of documents that proved their numbers were wrong. It goes further than that, into the realm of coercing power plant managers and tampering with the energy market itself. Remember those rolling blackout in California a few years ago? Those had nothing to do with an actual shortage of energy production ability verses demand in the summer months.
Why does Steve Jobs need an army of lawyers if he didn't do anything wrong?
Because the right to legal counsel applies to CEOs too?
Jobs needs alot of lawyers, because each lawyer he has means more padding between him when he hits the concrete.
Knowing Google's lust for data collection, the Soviet Union is still alive and well inside the psyche of Sergey Brin....
Steve Jobby Jobs, you need to get yo'self a Snoop Doggy Dogg
*plays the Apogee theme song music*
Get YOUR facts straight, they legitimately purchased those technologies from Xerox.
01101001 01100001 01101101 01101110 01101111 01110100 01100001 01101100 01100001 01110111 01111001 01100101 01110010
It goes further than that, into the realm of coercing power plant managers and tampering with the energy market itself.
... we want you guys to get a little creative ... come up with a reason to go down..." "... our electricity happens to be on-shift tonight ..."
No kidding.
"Tonight
"when Bush comes into office, with a business background, 'fudging the numbers' is not cool. "
I sort of threw up a little in my mouth when I read that.
Clinton's Justice Department was noticably lackadaisical about prosecuting or enforcing certain accounting standards (depends on what your definition of 'profit' is, I guess.)
Anyway, when Bush comes into office, with a business background, 'fudging the numbers' is not cool. You either made a profit or you didn't, regardless of what shell offshore companies you bought.
Um, no. Bush's Justice Department didn't move one finger to increase prosecaution for bad accounting practices until after there was huge public outcry over Enron, Worldcom, and other companies and then dragged their feet on prosecutions. Bush is strongly associated with Enron because Bush is a former business partner of Bush, among other things. Enron is Bush's #1 lifetime donor and his biggest contributor in the 2000 campaign. Bush has called Ken Lay a personal friend. He was also a personal friend of Dick Cheney. and part of his "Energy Task Force". It has been confirmed that Ken Lay was poised to be named as Secretary of Energy before the Enron scandal broke.
Bush is tagged with fostering this corruption.
Largely because he did. But most people throw the lion's share of the blame at the corrupt Republican congress for passing legislation that fostered a culture of abuse.
Excuse the pun, but isn't interesting that you can copy something from Xerox, a copier company.
I thought about this after I posted, but it seems disingenuous for the article to mention his knowledge if it was merely of the backdating rather than of fradulent reporting. Perhaps it's a sort of "on his watch" sort of thing, which holds a little water, but certainly nothing criminal. That's just a management mistake and weighed against Jobs' other achievements is barely something to shrug about.
Unless you're determined to be pissed off at Jobs, I guess.
I am the one true god. However, as an atheist, I don't believe in myself. I guess I have a self-esteem problem.
I just spent waaaay too much time with your sig...
public class doh
{
public static int i;
public static void main(String[] args)
{
for(i = 'a'; i = 'z' ; i++)
System.out.println( (char) i + " " + i);
}
}
just to tell me what it says.
I don't suppose I could suggest:
01001001 00100000 01100001 01101101 00100000 01101110 01101111 01110100 00100000 01100001 00100000 01101100 01100001 01110111 01111001 01100101 01110010 00101110
I guess thats all I have to say.
Ohh, and it's also worth noting that Apple called themselves out on the backdating of options. They announced it and started their own internal investigation 5 months ago. After it was concluded in October they publicly disclosed "serious concerns" of accounting fraud and options backdating by the CFO and senior vice president. The two have since "resigned."
So, ya, hiphip freak'n hooray for the Department of Justice. The Department of Justice started investigating a crime after the criminal notified them of the crime and started handing over evidence. I hope Alberto Gonzales has gold stars for everyone's awesome investigatory investigiveness.
"Things are more moderner than before- bigger, and yet smaller- it's computers-- San Dimas High School football RULES!"
If by "stole" you mean "licenced for Xerox' significant profit" and by "there original stuff" you mean "the starting point of what evolved over time through great effort into a usable GUI-based operating system" then your statement is correct.
It's "Don't be evil". And that's not Apple, that's Google.
Please, for the good of Humanity, vote Obama.
Won't fit in the 120 character limit for sigs. =)
01101001 01100001 01101101 01101110 01101111 01110100 01100001 01101100 01100001 01110111 01111001 01100101 01110010
felt snappier.
It's still fraud if the backdating occurred, and it's no less serious just because Apple pre-empted any SEC investigations. Most criminals don't get off scot-free just because they turn themselves in when it becomes obvious that the authorities are about to arrest them.
If the stock options were backdated are not declared, then the Apple officers receiving them were actually receiving additional compensation of the difference between the options' declared price on the backdated date, and the price on the real date of the option grant, and it's a cost to the company that is hidden, therefore overstating earnings, and fraud. If it had been declared at the time, it wouldn't have been fraud. It's not enough to just declare it now.
because only guilty people bring lawyers to court? i hope you never get picked for jury duty.
besides... this is over paperwork, and iirc there was some loophole that some financial people felt they were taking advantage of and that's why so much of this recently is in the news. Steve Jobs would be crazy not to have a good lawyer.
this won't do anything to productivity at Apple, no matter what happens. look at other cases of this recently in the news.
Somehow I just can't see Jobs needing the money badly enough. I mean, $400mill from selling nExt ... there must have been some left even after he paid Canon back...
"You must try to forget all you have learned. You must begin to dream." -- Sherwood Anderson
before, the SEC would get mad. now the SEC has the teeth. since companies must value outstanding options which decrease company assets (and profits), and understating of value of the options is a violation of the SEC acts of 1933 and 1934. This carries real prison time and real fines. If they're convicted it's a felony and they can't serve as an Executive officer or on the board of any SEC-reporting company. AKA they get fired. kinda sweet, i think. and you can thank worldcom for this one. this is a big thing they did.
MEF
Please, for the good of Humanity, vote Obama.
And I do not own any stock so I do not care. OTOH the company I work for is a bunch of slick theives who are doing this too - except with armies of in-house counsel covering their tracks as the rest of us peons get stuck with a poker. I guess when they get caught I'll be cheering.
and yet Bush is tagged with fostering this corruption
#include <halliburton_rebuttal.h>
Yeah, and we'll be watching just how long before the Bush admin. blames the incoming democratic controlled congress for the budget deficit created by BushCo.
Anyway, when Bush comes into office, with a business background, 'fudging the numbers' is not cool...(especially since Enron had Bush in their pocket...)...
Very confusing...Considering Bush's "business" background, I wouldn't trust him to run a lemonade stand.
What?
I'd get prison time for this type of income tax fraud/evasion.
I'd hope that more than a few of these fraudlent option backdating schemes land executives in prison since this should surely violate the Sarbanes Oxley statement that the executives signed in the last couple years.
I'd guess that given the precident that Sony apparently got away with a large crime in breaking into my computer to install a back-door rootkit without my permission. I'd go to jail for doing that to 1000s of computers around the world. Why did Sony not get truely run out of the USA music business (prevented from selling music in the USA) and/or the responsable Sony employees go to jail?
The recent proposed tax evasion amnesty for illegal aliens is another double standard since I'd go to jail for tax evasion.
I guess that working by the rules and paying taxes on time without cheating means you are a second class citizen.
Apple didn't steal from Xerox. Apple entered into a payoff and IP sharing deal. The myth of Apple stealing the GUI from Xerox conveniently ignores the actual business dealings that went into transactions that made the visit of Apple engineers to Xerox possible. Pick up a real business history book, and ignore braindead headline news versions of the story.
UPDATE: The Financial Times is now reporting that Apple 'falsified' files on CEO Steve Jobs' options to show that a full board meeting had taken place to approve 7.5m stock options that were handed to Jobs in 2001 without the required authorisation from the company's board of directors.
Change is certain; progress is not obligatory.
The kink here is that the practice wasn't illegal at the time. The amount companies are losing in accounting costs trying to back-file for the SEC retroactive laws should make you boil over. Oh well.
To veteran observers of AAPL stock, there is nothing new in the recent spasms of "news" concerning the options issues, citing unnamed sources and essentially repeating information from months ago, in advance of Apple's own disclosure. Over the past weeks hedge funds have driven down the price per share in advance of loading up prior to the Macworld run up in january. This latest news is being used as simple, but highly effectively ploy to bludgeon down the stock.
If you're interested in such matters, check out Cramer giving the inside hedge fund story on how to manipulate AAPL, here (the 12/22 video).
Hi:
I've been sued for something just because someone decided to go around shaking trees to see if money would fall out. A waste of my time and money and theirs, and endlessly frustrating, but it happens. You have to protect yourself against incopetance and people wanting a quick buck. The idea that 'only bad people need lawyers' is silly.
Don't think so. This is not news from months ago. The real news is the FT story, whose implications are quite startling. And its come out AFTER the decline has already started, presumably being the occasion of the decline. This one could run for a while and have quite interesting consequences.
Yeah yeah yeah - lawyer.. evil.. tell it to the birmingham five.. or any black kid attending school in the south.. or anyone who was arrested and found not guilty due to lack of evidence.
This is Slashdot. Lawyers ARE inherently evil here. The gestalt view is that when you're discussing lawyers in a given situation, there is really only *one* lawyer. That's the lawyer on the wrong side of the case. The other lawyer(s), representing the right side of the case, don't exist. Technophiles apparently are just as fond of having a whipping boy as any other demographic.
I'm also a law student, and the way I often explain lawyers and the law to most people is that the law is like plumbing. Everyone needs it, but nobody ever thinks about it until it's not working properly. The people who deal with the plumbing charge too much, they don't show up on time, and nobody really enjoys having to do business with them. You can do the plumbing yourself, but the more complicated the problem, the more important it is to have one of those stinky, dirty plumbers do it instead.
It is my view that most Americans (can't speak for people in other places, with other legal systems) don't often consider that the alternative to a complex and often unwieldy legal process is much less desirable.
Read the EFF's Fair Use FAQ
Ok then, what crime is Steve Jobs accused of? Where is the civil suit against Jobs?
Most people hire a lawyer after they get sued or arrested and charged with a crime. When someone hires a lawyer and they aren't charged with a crime or arrested with a charge against them, it makes me question why they have a lawyer in the first place.
Remember, Slashdot does not have a -1 disagree moderation, and no, troll, flamebait, and overrated are not substitutes.
I don't think that is a valid analogy. With most crime, it's a simple matter to know whether you are obeying the law or not. You can turn yourself in, but everyone knows that you broke the law, and everyone knows that you know.
But when you get into the realms of SEC regulations and abstractions like the date of an option, it is much more complicated. You could be breaking the law without knowing it. In fact, as far as I can tell, this whole "back-dated options" thing could reasonably have been considered legal until just this year. I guess the SEC issued a clarification or something.
In a situation like this, motive is important. Were you intending to break the law, or did you think it was legal? A self-investigation indicates that you weren't intending any wrong-doing.
And this is the way it should be. Wrong-doing is not always a black-and-white thing. You could be doing something morally okay, but legally wrong, or morally wrong but legally okay. Some laws are dumb, and sometimes you honestly don't know that something is illegal. This is why we have judges and juries, instead of throwing the book at every offense. We've got to allow leeway when the situation calls for it.
i'd hit it so hard, if you pulled me out you'd be the king of britain [bash.org]
People like you and me hire lawyers when we're sued. Rich people use lawyers far more often. Those lawyers (and, presumably, Jobs' lawyer) are specialists in various fields of law or regulation, and are hired to make things go smoothly and provide advice in their various fields.
Television tells us that, often, a rich person has a "lawyer on retainer" to deal with miscellaneous problems like bogus parking tickets or whatever.
i'd hit it so hard, if you pulled me out you'd be the king of britain [bash.org]
Well that is a much better answer, and it answers my question. I expected to get an answer, instead I was accused of being a troll and spreading FUD. I had no idea what rich people use lawyers for PR purposes and other things as well that are not law related. I usually figure that Apple's PR division would handle things and not a lawyer.
Remember, Slashdot does not have a -1 disagree moderation, and no, troll, flamebait, and overrated are not substitutes.
yay finally someone else who knows the truth...
"Just Smile and Nod." --Huck
This is not news from months ago. The real news is the FT story, whose implications are quite startling. And its come out AFTER the decline has already started, presumably being the occasion of the decline. This one could run for a while and have quite interesting consequences.
Well, Al Gore and the market both disagree. Slashdot readers comprise a broad set of backgrounds, and in my case I'm someone who has had his share of experience with hedge fund sleaze. Everything I've seen of the this story, its timing at the end of year, its endless repetition on CNBC, and the market behavior of AAPL over the past few years indicates to me that this was a planted story, designed to benefit short-selling/put buying prior to loading up with shares/calls before macworld. Good luck with your own investing.