Despite most of the good news surrounding Apple of late, not least the success of iTunes and the smash hit 3G iPhone, there has been a rather dark cloud looming ominously over the company for over a year-an-a-half regarding the tampering and backdating of Apple stock options. Though the US Attorney's office, according to the Wall Street Journal, have stopped their criminal investigation of Apple's illustrious CEO, there will likely be some lingering legal obligations and possible civil action that will need to be dealt with.
Perhaps the biggest and darkest cloud looming is the class action lawsuit filed by shareholders in San Francisco, which accuses Jobs of defrauding investors with Apple's backdating practices. Apple has admitted that Jobs was aware of backdating, but that he did not benefit financially from such action. Even if settled out of court the suit could cost Apple millions in penalties.
Jobs is likely to be called in the Securities and Exchange Commission trial involving Apple's former general counsel, Nancy Heinen. Heinen ha been charged with altering Apple documents regarding backdating stock options which could be tad awkward for the company co-founder, if he is called to the stand.
Former Apple CFO, Fred Anderson, was also charged by the SEC for his involvement and has agreed to pay $3.5 million in fines and penalties though he admitted no wrong doing and is on record for attributing blame on Jobs for the accounting implications regarding the disputed backdated options.
There could also be some issues regarding backdating with his former company Pixar Animation, in Emeryville as Pixar have said its former CFO could face civil charges from securities regulators. Steve Jobs was CEO before the Walt Disney buy-out and could once again be called to take the stand.
The practice of backdating options has been in the forefront of various corporate scams in recent years. To date, twenty executives have been indicted with criminal charges. Most 'high profile' cases are settled out of court avoiding the costly market and media speculation. Of the two cases that have made it to trial, both defendants, Greg Reyes, former Brocade Communications CEO, and Stephanie Jensen, a former VP of human resources. Both were convicted.
The backdating process is usually where senior executives offer options to employees at a previous low strike-price, as a benefit or reward, providing the maximum return when it comes time to cash them in. It's not uncommon and it's not illegal providing it's all above board and declared to the SEC. Something that until recently, Apple had not done correctly. Tisk, tisk.