Apple faked files in Steve Jobs stock options scandal
By Peter Rojas 
posted Dec 28th 2006 1:27PM
posted Dec 28th 2006 1:27PM
It seems that the scandal related to Apple backdating stock options has gotten a little more serious. According to the Financial Times, in 2001 Steve Jobs was granted 7.5 million stock options without the proper authorization of Apple's board of directors, and it now appears that someone falsified board meeting records to make it look as if Jobs had received authorization for the grant. The Securities and Exchange Commission is weighing whether to take action against Apple and/or any of the individuals involved, though whether Jobs himself might potentially be in any legal hot water is unclear. Jobs returned all granted options to Apple before exercising them, which perhaps explains why the company issued a statement in October saying that an internal investigation had cleared him of any wrongdoing (the company did force a former CFO from its board). Whether the SEC decides to go after Apple, Jobs or anyone else at the company remains to be seen, but the FT notes that plenty of other CEOs have resigned in the wake of similar backdating scandals. You could argue that given how well Apple's stock has done over the past year that even shareholders who feel cheated by what happened would rather own stock in a company helmed by Jobs than one without him, but rules are rules and if turns out that anyone at Apple broke the law it's unlikely that the Feds will go easy on them. [Thanks, nightryder21 and todd]
Steve Jobs deserves to be punished.
Care to tell why? And remember, if you don't, then you're just another anti-Apple fanboy.
Are you bypassing the conventional judge & jury?
punished for what? money he returned ( key word returned) before taking advantage of any of the benefits of having it...if you ask me they should use this as an example of what a CEO is suppose to do. return tainted money, drive up stock prices, and make apple a common household name.
that sucks.
because I would enjoy watching it.
lol. And apparantly, you are an apple fanboy.
If he did something wrong then he should be out, But Innocent until proven guilty.
Apple is Stevey J's baby. I don't think he'll let this come between him and his child...
Wow sounds like a serious problem for apple in general.
They where/ are on the verge of obtaining serious market share and thsi happens?
Steve jobs why?
Either way, Jobs could be in deep doo doo. Even though he didnt exercise his options, his involvment in the whole thing could force him out of apple. He hired his own personal lawyer outside of apples lawyers to represent him. Things are bound to get intresting.
I don't know if Apple will ever get rid of Jobs, again. Jobs is Apple. Apple is Jobs. Without him I honestly don't see how the company could survive. Some of us do remember how close to the brink of vanishing Apple was before Jobs came back. And some might even remember when he was sick and diagnosed, how Apple's stock quickly began to fall. He is so tied into the company, if he leaves, it will have a great effect on Apple's stock. Apple knows this and so do the shareholders. After all, it has been Jobs who is making them money.
While I wouldn't go as far as Mike I would say that few people would have a reason to falsify the documentation. I doubt that even the staunchest Apple fanboy would stick their neck out so far as to falsify documents so that Steve Jobs can make somewhere around $500mil.
According to this story, the only person who sounds guilty is the one who falsified board records. That's one bad apple.
The company itself has always seemed to have their act together and responded (in general) positively to customer feedback.
The way they dress in their commercials still gives me the willies, though.
It's nice to see Peter blogging on engadget more.
What's the probability that Jobs was told that the Board approved the options but then realized that it was forged, and thus, he gave the options back. Very likely. Or, it could be that Jobs just decided to keep himself out of [deeper] trouble and just give the options back to be somewhat safe about it all...
Very interesting stuff, we'll see what happens.
Microsoft fanboy: ZOMFG! It's the end of Apple!!!11 Windows FTW!!
Apple fanboy: n00b! It's a Bill Gates/Micro$hite conspiracy!!!one Ballmer eats babies!!
Sony fanboy: Wow, just imagined if we had this to deal with as well...
Is it just me or anyone else think SJ already looks like a presioner. (da face... da hair...)
I am by no means saying I think Apple should walk away with little more than a slap on the wrist, if it were up to me, well, I am not exactly sure what I would do to them, but it would probably be way too harsh I am sure. But the truth of the matter is simply this: no matter what kind of sanctions of punishment is dealt to Apple of even Jobs himself, it isn't going to stop Apple in any from doing what they do, which is market and sell clean designs for already existing hardware and software in the market, (read: mp3 players and operating systems). If anything, it would give Apple yet another chance to prove why it is quickly becoming the Rocky Balboa of the computing world, for some reason, they are just too dumb to give up and always come back with some heavy left-handed haymaker like OSX or iPod. I couldn't give 2 shits for either of them, but that doesn't mean they don't exist.
Besides, this is a stock options issue, what's the worst that can happen to us as consumers? Investors may have a hard time coping, but the only money I'd ever invest in that company is probably buying my girlfriend some downloads from the iTMS.
Jobs wouldn't be let go. Apple and other companies he has ties to wouldn't be able to function. Whatever he touches turns to gold. The shareholders wouldn't stand for it.
What if this is a conspiracy to raise Apple's profile in the news?
You know: Apple/Jobs are accused of improprieties, in today's business climate of upper management corruption, to only later be overwhelmingly exonerated. Apple/Jobs' image as beyond reproach is reinforced and they receive months worth of free publicity in the media as being a company you want to do business with/patronize.
You know, that old chestnut...
You're the CEO of a Public Company.
ONLY the BoD's Remuneration Committee is authorised to approve Stock Awards. Even regular managers awards have to be approved by the board (after recommendation from HR and senor management) and the BoDs routinely CLOSELY vets senior exec awards and usually discusses with the head of HR the size of top awards and relates them to competitive analysis b4 approval. The CEO obviously attends all Board meetings (and he's usually a board member), however, when a disussion on his own Stock/remuneration comes up he is asked to step outside while that discussion and vote is held. He is then re-invited back when a decision is reached and told the result.
The Head of HR knows this, the CFO knows this, the internal and external auditors know this. A CEO should also know this (it's NOT sophsiticated financial accounting) and if he doesn't the aforementioned should bring it to his/her attention immediately.
I might be the only one that thinks this is a good thing. It will temporarily drive down the stock, I can buy it for cheap, and then it will bounce back. I highly doubt that SJ will be ousted from Apple because everyone knows what happens to the company when he is away.
it is curious that of the dozens (hundreds?) of companies being investigated for these stock-backdating issues apple is the one getting dragged through the mud. microsoft, verisign, cnet and a fair few other big names are undergoing the exact same investigation right now, but you hear very little about their investigations.
whatever. apple stock holders have made out like bandits over the past 18 months, if they'd been losing money this would be a big deal. so a few more token apple board members/executives will get canned. jobs will remain CEO, the stock will rebound significantly at MWSF. everyone, but litigious/free loaders is happy.
"it is curious that of the dozens (hundreds?) of companies being investigated for these stock-backdating issues apple is the one getting dragged through the mud. microsoft, verisign, cnet and a fair few other big names are undergoing the exact same investigation right now, but you hear very little about their investigations."
There is ignorance in all it's glory. This is an issue BECAUSE all those other companies have been caught doing it. And it's news because of the way both Apple and Steve Jobs have marketed themselves as something different than the great, evil Micro$oft.
Maybe not quite so much as they'd have you believe.
Does anyone still remember HP mess few weeks ago?
... look at HP's share price today and you'll understand my point precisely.
Time for iPrison ?
- Impossibly small cell
- 1000 iMates
- Oh well, life is random !
In this specific Apple and Steve Jons case nothiing makes sense to me, based upon what I have read in the public domain.
1) BoDs if they did NOT approve the big awards would clearly have seen them in the Financial papers they review each Quarter and for the annual report/AGM. Why did they not raise the issue?
2) Why would the Head of HR and CFO not bother to go thru the correct prefact BoD channel? A guy like SJ is so pivotal to Apple awards of the size mentioned would clearly have been agreed.
3) Returning an award years later does no let everyone off the hook.
4) Cleary SJ treated Apple well. Heck isn't he the guy who worked for $1.00 Salary for many years while working to turn the company around. Didn't he even say that his stock interest was motivation enough?
5) Clearly SJ is ine strong minded individual and probably not easy to work for/with. But would he have fired a CFO, if the latter reminds him that certain key issues have to go through a BoD and cannot be approved finally only by the CEO especially if they relate to the CEO? It's the DUTY of all CFOs to protect the company and the ceo and ensure that such issues are nailed down. If there are items which needs some clarification there are in house Layers, Accountants, BoD members and even outside Auditors to cross check with.
None of this makes any sense. For such a succesful company (and others) to trip over such rudimentary controls is amazing IMHO.
Oh and the date of such awards (and thereby prices) are on the day the BoD approves the awards. No ifs ands of buts.
Eh, who cares. The dude took a $1/year salary. Give him a friggin break.
iBreak.
"punished for what? money he returned ( key word returned) before taking advantage of any of the benefits of having it...if you ask me they should use this as an example of what a CEO is suppose to do."
There are 2 options, either he took the stock on purpose or it was handed to him wrongfully and he knowingly accepted it, it is pretty much impossible for him to have taken it and not known that it wasn't approved since the papers were forged meaning he hadn't gone through the proper channels.
Analogy time!
If he did it on purpose:
You go to an atm, hax0r it up and take 20,000 dollars. You don't spend the money for a year or 2 just to make sure you're in the clear, then if you get caught give the money back and say it was an honest mistake.
If it was wrongfully given to him and he knowingly accepted:
You go to an atm, withdrawl $20 but it gives you $20,000 due to a glitch. You take the money but don't tell anyone. You don't spend the money for a year or 2 just to make sure you're in the clear, then if you get caught give the money back and say it was an honest mistake.
As you can see, the outcome could be the same whether he did it on purpose or not because there is no way he could have not known the stock was illegal.
The legitimate thing to do would have been to report it immediately but instead he chose to sat on it until the money started getting hot.
Either way what he did was illegal since he knowingly accepted stolen property.
How about option 3:
You withdraw $20 from your account.
The bank fails to credit your account for this $20.
You notice this two years later.
You contact to bank to make them aware of this past mistake.
You make certain the bank addresses the problem and you give back the interest accrued on that extra $20.
You change banks because you expect better accounting practices.
You contact the IRS to see if there are any adjustments you would need to make as a result of this error.
There...that's a closer analogy.
hey let him off if he gets rid of DRm but if he doesn't rot in jail with your DRM.
or offer to exchange Apple DRM to Windows DRM or something of the sort...
boy the last time that Apple went without Steve, things went SWIMMINGLY!
Unfortunately, if this investigation results in Steve Jobs dismissal from Apple, it won't be Apple's doing. Rather it would be from the ruling of the SEC.
Right now, the SEC is only keeping an eye on this investigation and is not involved (at least as I read). The recent reports (which are rehashed accounts from throughout this year) imply that the SEC could quickly step in and take over the investigation. If that happens, then the SEC could find Steve Jobs liable for Apple's trangressions and punish him/Apple.
This would indirectly hurt the stakeholders of Apple (shareholders/gadget-lovers/apple-fanbois/etc). The benefit would be that the SEC proves to all companies that they are serious about options-backdating problems.
It seems however, related to that last point, that the SEC would not need to make an example out of Apple, because so many companies are being open and proactive and correcting their backdating "errors"
"We believe there is less than a 5 percent chance that Steve Jobs would have been personally involved," Piper Jaffray Gene Munster said in a note to clients on Wednesday.
As a shareholder in many corporations I would be outraged if I was cheated out of some portion of my investment, Steve Jobs or not. They give backdated options so the return on said options are greater. More importantly they devalue that block of stock they gave him. And he then is able to sell it at a greater return, reducing the value of stock I bought at the price it should have been worth. I don't care how much someone has done for a company I hold stock in, they are messing with my stock value end of story. The rich get great justice, hell we all get what we pay for.
I wonder what would the comments be like if we replace "Steve Jobs" with "Bill Gates", "Apple" with "Microsoft", and Steve Jobs' picture with Bill's.
I thought so.
Bill Gates is not closely tied to the future success of Microsoft.
Steve Jobs is closely tied to the future success of Apple.
That difference highlights why this story has become so inflamed. This Apple story transcends 'the fanboi' and makes it to the main pages of Wall Street's best/worst.
With Microsoft the response would be different. Just like it would if you changed the name to Enron (negative), Salvation Army (positive), Bengals Football (negative), Steelers Football (positive), Martha Stewart (negative). you get the idea. Do not blame us for giving Apple the benefit of the doubt, they do not have the reputation that microsoft has yet.
Anything Steve Jobs touches turns to gold?
Jesus Christ you fanboys are horrible. Hell most of you are just band wagoners post OSX. Not even true fanboys.
Let me tell you about the crappy OS's named OS 9 and OS 10.0. Those were absolutely horrible.
So not everything Steve Jobs touches turns to gold.
With that being said before someone says "hurr Echo is a anti Apple" No i use apple's along with Linux and MS based systems.
Yeah the guy took a $1/yr salary because he felt so guilty of double-dipping by robbing the stockholders blind.
Anyway the guy can't take all the stolen loot with him - so i guess he oughtta enjoy it while it lasts.. as another poster pointed out and as many already knew back in may or so, Stevie J was "diagnosed" as chronically ill but the exact nature of the illness remained shrouded in the typical Apple veil of secrecy. Then a worker at the clinic he was receiving his treatments from was interviewed and then the Apple lawyers got a hold of her and put a muzzle on. Some of us know the real story but some don't:
[URL=http://imageshack.us][IMG]http://img242.imageshack.us/img242/6007/stevejobsaidscp8.jpg[/IMG][/URL]
Martha Stewart=negative? Er, I don't think so or, at least, not anymore (according to the opinion poles).
Oops.. retry on image:
http://img242.imageshack.us/img242/6007/stevejobsaidscp8.jpg
You suck at photoshop
StinkyChinkie, I believe you're the type of person who "skims" keywords among headlines only. It doesn't hurt to "read" some facts once in a while.
Btw, Steve Jobs' wealth primarily comes from Pixar, not Apple.
Um? Hate to say this, but the more I read about it the more it sounds like an internal affair. What is the Fed doing sniffing around anyway... that would be like a cop arresting my kid for accidentally breaking the kitchen window with a baseball. I can punish my own kid, and Apple can hire it's own investigators if need be. Unless they can prove any of this actually hurt any consumers or unfairly gave them an edge against the competition, the government should mind it's own business.
No - this involves de facto manipulation of stock price as a bonus. Which necessarily involves the SEC.
Damn! I just bought my 2nd Mac, a Mac Pro. I hope this crap can be resolved by them and the SEC quickly and doesn't interrupt the forward momentum this company has been enjoying.
No fan-boy here. I'm just, perhaps, another PC/Apple user that happens to enjoy both systems. I hope the worst the guy and the company will get will be just a hefty fine, if they broke the law.
It turns out that Apple is crooked like other corporations.
Surprise surprise.
Can we stop acting like Jobs and Apple are the second coming?
Hopefully it wont be a debilitating legal woe to Apple. Remember how bad Microsoft got hurt when they were found to be in violation of Anti Trust....
oh wait...
I read about this yesterday, this is not the first time Jobs pulls a thing like this: yesterday's news: "Gov't probe: Apple 'falsified' documents on Steve Jobs' options" at http://blog.americasnewstoday.com/2006/12/27/govt-probe-apple-falsified-documents-on-steve-jobs-options-two.aspx
and prior that: "Apple Co-Founder Speaks Out; Steve Wozniak Stiffed by Best Friend Steve Jobs" at http://blog.americasnewstoday.com/2006/10/03/apple-cofounder-speaks-out-steve-wozniak-stiffed-by-best-friend-steve-jobs.aspx
Mmm.. I think the pro-apple people are missing one important part of the story - the fact that someone has allegedly altered documents to make it look like this didn't happen.
The bank transaction error analogy is flawed because this aspect isn't included: it would be more like going to the ATM, withdrawing $20, but actually getting $20M, then finding a way to edit the audit trail so the bank can't prove you did it - and getting caught.
Similarly, it's entirely possible someone else at Apple did the fiddling all on their own - but it's hard to see who would do it - there aren't too many people who would benefit directly or indirectly from such a risk, other than Jobs, and who would have access to records to do the deed - especially since it's kind of illegal and could land the person in jail.
On the flip side, it's hard to imagine Jobs being this stupid - so that's a strike against the idea - but then again, we've seen stupider things done by smarter people... so.
In the end, the best position to take is: something had happened that smells - but until the investigation is over, it's probably best not to point fingers - or deny that something has happened.
Both POVs are pointless.
Not sure if anyone commented on this already. Could this be why the WWDC keynote had multiple speakers? To see which one would be the best replacement, if Jobs were to leave the company under the hot water.
Not sure if anyone already said something like this, but could this be why there were multiple speakers at WWDC 06? To find the best replacement, if Jobs were to leave due to the stock options scandal.
It's my understanding that because he did not exercise the options that this whole thing is moot. History shows that ceos with this type of past tend to be slapped on the wrist and nothing more. I have been reading up on the subject at http://www.businessbookreviews.com
They provide cliff notes versions of books and research data so you can move through subject pretty quick.
oops... that was http://www.businessbookreview.com
Sorry
I can hear a million fanboys getting ready to cry.
Apple = Microsoft = HP. Just more corporate BS. No one is above the fray.
Power tends to corrupt; absolute power corrupts absolutely. Lord Acton.
the weird thing is: jobs never asked for these ridiculous perks he got. sure he needs to be compensated as hell - he's the only reason the company is where it is today. unlike other CEOs, no-one else could do his job.
gotta say it: great time to buy AAPL. Oh freaks, I am too late it's already back up 5%. Darn!!!
Cool - iFraud !
iWMDs
"And it's news because of the way both Apple and Steve Jobs have marketed themselves as something different than the great, evil Micro$oft.
Maybe not quite so much as they'd have you believe."
What way is that Rob? Except for commercials 26 years ago, how has "...both Apple and Steve Jobs... marketed themselves as something different than the great, evil Micro$oft"? Wondering what "marketing" you are seeing and suspecting it is simply your fanboy angrrrr.
I was part of a team that sent another team to ask Gates (and Microsoft) to support Momenta's new pen tablet computer. The result of that meeting was PenWindows and theft of Momenta's intellectual property. We tried to sue, but were immediately overwhelmed by Microsoft's legal team (flooding us with "discovery" requests and many more boring and hurtful tactics). Momenta went quietly into that good night with more than a few of us fantasizing about setting Gates and Microsoft on fire and roasting marshmallows over his/their blazing carcasses. Being the non-psychotic non-killers we are that fantasy never materialized.
Since I've had more dealings with Microsoft, and even more experiences with Apple. Not all Microsoft workers are evil, as a matter-of-fact some are quite good folk. I've had "moments" with Apple that weren't all wine and roses, but I think most seasoned employees of Microsoft would admit that there is a very "bottom-line" kind of thinking in Redmond that often leads to less-than-altruistic decision-making. Ironically, there is very little "evil Microsoft" chat or (from what I've seen) thinking at Apple. Point being? The often cited, supposed hatred or disdain for Microsoft by Apple simply doesn't exist, but the opposite is true among certain Microsoft folk... you know the ones... they often extol the benefits of using Windows over Unix in almost every circumstance. There is a very palpable disdain that oozes out of the pocket protectors of more than a few coders 'n their ilk that is very often directed towards their fellow Microsoftians (who code for the Mac).
Apart from that little bit of Hatfield and Mac-coys, there is a GREAT deal more trust when asking for support for a new product at Apple. My fellow entrepreneurs are VERY careful about what we reveal in the halls at Redmond. Apple is well-known for being either: trustworthy in this regard, or willing to pony up big bucks for whatever it is they would like to acquire, and at Apple "no" means "no". Apple sends geeks to ask questions or permission to take a peek, Microsoft sends *lawyers* and lots of 'em. I know about that which I speak, and big time.
At any rate, concerning your comments about how Apple has "marketed themselves as something different than the great, evil Micro$oft", I don't think I've ever heard them doing this about *stock options* for crying out loud! Something different is about *user friendliness* and *human engineering*, not boardroom fiscal policy. WTF? I think 'ole Robbie V. has been sippin' the corn liquor and feeding his psychosis. Being different is about not stealing your company out from under you with a smile on your face.
There is one bit of glee I find in all of this; it wasn't too long ago that "little Apple" would have never raised the ire of folks like Robbie baby 'n crew. Things are just a little *different* now, as Apple (and the Steve) are serious business and their influence is no longer something that Microsofters can feign ignorance about. "What? That's absurd! This graphical user interface leapt right outta good 'ole Bill's head, or from Xerox... I can't remember..." I think things are just a litttttle bit too "fruity" out there for folks who like to go computer-spelunking for naughty .dll files every fortnight. Hee hee.
Just keep repeating to yourself... "Sony is gonna buy 'em soon, and then I can buy an iPod... dammit." Or... "Who needs a computer that runs three operating systems outta the box?!" (a variant of "Who needs a mouse?" or "Who doesn't need a "C" prompt?")
Don't worry Mike V, or Rob V... wait... are ya'll brothers? Uh, anyway... don't worry fellas, there’s a game coming out for the Wii that lets you run Apple Computer yourself, and it even has a "disaster mode" where you can make the Steve embezzle funds and get tossed in the calaboose! You use the controller and nunchuck to fend off the inmates bribed by PC heads to molest our Pixar hero. A feature I know you two "V"s will like is the mini-game that simulates a real Macintosh! That way you can finally use one without really "using" one, and then when you pretend to be a former Mac user that "switched" to PC... it will ring with waaay more authenticity than it does now. It has a coupon for a free iPod Shuffle... that’s the one that doesn't have a display! That way you can keep right on jamming to those fav Debbie Gibson tunes without anyone the wiser. Won't that "V" great?
I'm sick of these guys getting away with theft and fraud. I want to see some of these jerks on the side of the highway picking up trash.
No one backdated my worthless stock options of put the money back into my 401K from 2001's market meltdown.
SEND THEM TO JAIL!
It's interesting to me that I neither said Apple was bad, nor that Microsoft is good, in order to be declared a fanboy. Or that such completely irrelevant information as the initial of my last name could be said to have any bearing on what I did, in fact, say.
"What way is that Rob? Except for commercials 26 years ago, how has "...both Apple and Steve Jobs... marketed themselves as something different than the great, evil Micro$oft"?"
So that funny little marketing campaign going on right now, the artsy, fun-loving guy vs the stodgy, uptight geek, that's supposed to make them look alike? I doubt there's anything out there to suggest that Steve Jobs didn't approve that.
It's a marketing image Apple has *always* used in its competition with Microsoft. And still does. And this little scandal, whether Steve Jobs is personally responsible or not, makes it clear that this distinction isn't quite so much so as Apple wants us to believe.
Once again a Windoze fanboy pretends that what he says, is what Apple is saying, and tosses up a "strawman fallacy". Lets look at it *logically*, mmmm k? You said:
"And it's news because of the way both Apple and Steve Jobs have marketed themselves as something different than the great, evil Micro$oft.
Maybe not quite so much as they'd have you believe."
Notice that you said that they "have marketed themselves as something different than the great, *EVIL* Micro$oft"... see that *great, evil* part, Skippy? It's that *evil* part that MODIFIES your statement.
Now, had you said that "Apple has marketed the Macintosh operating system as something different than Microsoft's Windows", I would have had nothing to say *about that*. But when you talk about *fiscal policy* and you say that Apple is saying (in their ads) that they are different than “the great, evil Microsoft”… well, then Houston, we have a problem… a BIG one.
Philosophy and logic lesson… free.
Chance that fanboy learned anything… priceless.
Probability that fanboy did learn something… impossible.