Apple, Inc. Summary: According to a recent news story, plaintiffs filed a class action against Apple, Inc., its CEO, CFO, former general counsel and certain board members for participating in a scheme to file false financial statements, thereby concealing millions of dollars in executive compensation though the backdating of stock option grants.
The report recounts that in June 2006, Apple acknowledged that an internal investigation had revealed irregularities in its stock option grants between 1997 and 2001. It also said that one of the grants in question was to Mr. Jobs but that "it was subsequently canceled and resulted in no financial gain to the CEO."
According to the complaint, Apple's share price dropped 14% in the two weeks after Apple's admission, erasing more than $7 billion in share value. It is this loss that the plaintiffs hope to recover.
InformationWeek further recalls that in December 2006, Apple said that as a result of its internal investigation, it would restate its financial results to include "an additional non-cash stock-based compensation expense of $84 million after tax [$105 million pretax], including $4 million and $7 million in fiscal years 2006 and 2005, respectively." The company said it had found no irregular grants after Dec. 31, 2002.
The report relates that the 105-page complaint asserts that Mr. Jobs and the other Apple executives named in the suit knew what was going on. "The defendants knew that options were not granted on the dates that were disclosed to shareholders and falsified the company's records to create the appearance of illegality, and thus bear direct responsibility for their actions," the complaint states. "Here, Jobs and the Individual Defendants clearly appreciated the fraudulent nature of their conduct."
Mr. Jobs, the complaint further states, made an "instant paper profit" of $20,325,000 when, on Dec. 18, 2001, he received 7.5 million Apple shares in a stock option grant dated back to Oct. 19, 2001. And Apple's books did not show a $20,325,000 expense.
The complaint also cites a 10-million share option grant in January 2000 that, through backdating, resulted in "instant paper profit" of $83,762,000 for Mr. Jobs, an amount that at the time was not disclosed to shareholders.
On July 22, 2008, the Court stayed this case pending the appeal in the Vogel v. Jobs et al., also filed in the United States District Court for the Northern District of California.
SIC Code: 3571
Industry: Computer Hardware
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