Former Apple CFO publicly blames Jobs for stock options scandal

Ouch, El Jobso is not pleased. The tech exec superstar who's largely gotten off clean despite Apple's lingering backdated stock options scandal is now being publicly blamed for wrongdoings by former Apple CFO Fred Anderson, who was dismissed by the company in 2004. According to a statement issued by Mr. Anderson's lawyer via the SEC:

"Fred cautioned Mr. Jobs that the Executive Team grant would have to be priced based on the date of the actual Board agreement or there could be an accounting charge. He further advised Mr. Jobs that the Board would have to confirm its prior approval in a legally satisfactory method. He was told by Mr. Jobs that the Board had given its prior approval and the Board would verify it. Fred relied on these statements by Mr. Jobs and from them concluded the grant was being properly handled. ... It now appears the Board may not have given the necessary prior approval to the grants, contrary to what Mr. Anderson understood from Mr. Jobs"

This statement was issued after Anderson was ordered by the SEC to return $3.5 million dollars in stock options and also fork over a $150,000 fine for his part in the whole mess. On the flipside, former Apple general counsel Nancy Heinen seems intent on going down with guns blazing: from what we can tell, she has no plans on settling so easily. The SEC charged her for her participating in a scheme that caused Apple to under-report its expenses by almost $40 million, and it looks like she's going to court like the high-powered attorney she is. Things are not looking good Cupertino way -- could this mark the beginning of the end of the Jobs-led Apple corporate structure as we know it? Only time will tell, but we'll keep you updated. [Warning: link requires subscription]

[Paul @ Apr 24th 2007 2:34PM]

so boring

[Arno @ Apr 24th 2007 2:36PM]

Jobs sucks.

[Storm9 @ Apr 24th 2007 2:37PM]

Doesn't seem to be effecting the stock.
Apple was up 2.79% yesterday and is up 1% again today.

[John Doe @ Apr 24th 2007 2:42PM]

Always...always...ALWAYS leave an e-mail trail. This he told me, they told me. Its all BS without a paper trail. The only reason not to have one is if you have something to hide.

PS- Jobs is a scumbag. I've known it since day one. All the rumors that he's an asshole. All the suggestions he's a pompous jackass. I'm betting they are all true. And for those zealots who would willingly lay down and let the man walk on you like a carpet because he's the holy one who started Apple. I say get a life.

[John Stracke @ Apr 25th 2007 11:45AM]

I don't even give Jobs much credit in starting Apple. He took Woz's amazing tech and ran with it.

[fred @ Apr 24th 2007 2:52PM]

This is just like when a kid sits there, and watches another kid do something stupid. "I told him not to do it, Mom."

[Chris @ Apr 24th 2007 2:56PM]

Frankly, it doesn't matter if the Board did or didn't approve it. That fact does not make backdating options any more legal. The Board is not a group of GAAP minded CPA's. It was his duty as CFO to inform them that backdating options was non-GAAP. If they fought back, he could have told internal audit, the external auditors, or the audit committee. No excuses.

[crescentdavid @ Apr 24th 2007 2:59PM]

If it's true, there's an upside and a downside. Obviously, it's a greed thing, because Apple has done amazingly well under Jobs. If it results in a restructuring, Apple will emerge stronger. Obviously, at the moment, the market seems to be relatively unconcerned this is a core concern for investors.

[Chris @ Apr 24th 2007 3:03PM]

FYI - The reason investors don't really care is because Stock Option Expense is a non-cash expense. They basically give employees the option to buy stock at a specified price at some point in the future. It has no effect on operating cash flow, but it does affect net income. This is not one of those accounting scandals which ends up sinking a company b/c they hide debt until they are suddenly out of cash, like Enron.

[sdsdv10 @ Apr 24th 2007 4:05PM]

Chris,

As has been noted numerous time backdating options in neither illegal nor non-GAAP. However, you must account for them properly and place the appropriate charge on the books. Not taking the charge is the illegal part, not backdating.

[rcusa @ Apr 24th 2007 3:04PM]

http://en.wikipedia.org/wiki/Stop_Snitchin'

[nikster @ Apr 25th 2007 1:37AM]

LOL rcusa, thanks for the stop snitchin' link. Fred Anderson should have a little chat with Cam'ron.

Short summary: "Yes I f'ed up but da boss told me it's gonna be allright and I believed it.". No need to write a 10 page essay.

[Crayola @ Apr 24th 2007 3:07PM]

Looks like Steve's canonization is in doubt... Will he perform another miracle with the iPhone? Compared to 'Sir' Bill, Steve is a drug pusher of consumerism.

[Henry @ Apr 24th 2007 3:22PM]

Sure he's a pusher of consumerism, but at least Apple has great products, unlike the giant pile of crap that is Vista.

[anonymouspimp @ Apr 24th 2007 3:37PM]

Wait, did anyone actually doubt the fact that Jobs knew what they were doing? Jobs isn't retarded.

[Matt @ Apr 24th 2007 4:07PM]

But at the same time I wouldn't lable him as "smart" either...

[tim @ Apr 24th 2007 3:41PM]

"Things are not looking good Cupertino way -- could this mark the beginning of the end of the Jobs-led Apple corporate structure as we know it? "

I think you missed the SEC's statement that there will not be further charges against Apple, and that they cooperated fully and met the SEC's concerns.

Heinen has to fight because she can be banned from Corporate Governance, and she can put up a good fight. Fred's statement mentions Jobs, but wholly in accord with Apple's statements and what the SEC already knows. He is only trying to explain himself.

Apple didn't go up because today because things aren't looking good. They went up because the story is basically over.

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070424:MTFH42349_2007-04-24_18-04-15_WAT007385&type=comktNews&rpc=44

[Ryan @ Apr 24th 2007 3:43PM]

Did you notice the last line in that article?

"With this matter resolved, Fred looks forward to continuing his career as a Founder and Managing Director of Elevation Partners."

In other words, he's going to be just fine kickin' it with Bono and friends

[Chris @ Apr 24th 2007 4:23PM]

Of course, you're right, I should be more clear.

Nothin' gets me excited like expense recognition!

http://www.biz.uiowa.edu/faculty/elie/backdating.htm

[Ben H @ Apr 24th 2007 4:13PM]

Amazing how hypocritical fanboys like Henry are. Microsoft does something fishy, they find a million blogs to cry about it and post it on Digg. Apple does it, they make excuses, and "remind" us how great their overpriced products are. Guess what, business is business is business. You may see great products like your pink iPod you love so much but forget that there is a business running in the background. Regardless of who the company is, illegal is illegal.

[Ian Jardine @ Apr 24th 2007 5:19PM]

Amazingly backwardation of Options is not always illegal. However the BoDs HAS to prefact approval the specifics of the awards, b4 they are rolled out. And then the company has to ensure the tax treatment is correct.What's new here is that the prior CFO is reporting that the CEO told him the BoDs had given their approval. What's going on here is that this CFO is saying he was assued that the BoDs had already given their approval. Now were the CFO went wrong is that he should have pushed back to the CEO and said "Show me the notes of the Board meeting (which the cfo apparently didn't attend) wherein the BoDs approved the backwardation of these specific options. A mistake for the CFO in apparently not pushing this hard. Of course had he pushed that hard me may not have survived..... Sorta caught twix the frying pan and the fire....
It's not always that a staffer such as the CFO can push that hard and survive, but he has a responsibility to the BoD and Shareholders to push. Most don't. Actually the BoDs also should have realised that they were being given the Options, for approval, too late, as should the Lawyers and the external Accountants.....Same problem also in the other company Disney bought.....

The whole incident is really silly. As I say it's not necessarilly illegal to grant such backwardations, so long as everyone is prefact on board in writing, especially the BoDs signing off b4 the options are rolled out. So why on earth did Apple (and SJ's other company) decide to go to their respective BoDs for only after the fact written approvals? Perhaps SJ and others thought they might be onn thin ice??? However, the Lawyers and CFO should have informed SJ and others that the option deals could be done with backwardations, provided they were upfront and had a prior BoDs meeting to approve it. Wuld the BoD have objected if presented properly? I doubt it. Seems a lot of people made a simple task verry convoluted for no good reason IMHO.

Now should backwardation of options be allowed? That's an entirely different matter and is a good question. But it's not relevant to Apple's situation of several years ago.

[Dave @ Apr 24th 2007 7:03PM]

Fuck him..he's gone

[david @ Apr 24th 2007 8:43PM]

Being in the corp world myself. I can't remember crap said more than a few days back. That's why I archive important emails. Nothing is done by voice.

[Roger @ Apr 25th 2007 12:23AM]

Does this surprise anyone? If it does, I have some land off the Florida coast for sale.

[Bilbo Baggins @ Apr 25th 2007 11:31AM]

It's over folks, nothing more to see here.


http://www.nytimes.com/2007/04/25/technology/25apple.html?ex=1335153600&en=c5f0bab9c91bb4b0&ei=5090&partner=rssuserland&emc=rss

[Dominic Cordisco @ Apr 25th 2007 12:25PM]

I find it interesting that both the editors and commenters on Engadget seems to be making a much much bigger deal about this than anyone else, including the Securities and Exchange Commission, which, it appears, will be closing its files without any further action against either Apple or anyone else, including Jobs.

While certainly Engadget is a great service for gadget news, perhaps when it comes to financial news, people would be better served by getting their information from a more traditional and reputable source:

http://www.nytimes.com/2007/04/25/technology/25apple.html?_r=1&oref=slogin

Seems like the bias of Engadget and the conclusions drawn by most of the peeps commenting on this thread are out of whack with reality. Just saying.

[Anonymous @ Apr 25th 2007 2:30PM]

Jobs still has billions of dollars, and this CFO guy still has millions (if not billions) aswell. Cry them a river, shit.

[RandomThoughts @ Apr 25th 2007 9:54PM]

First, the CFO's comments were probably a requirement in the SEC's settlement. Second, backdating of stock options is not illegal. Not accounting for the backdating is illegal.

[Dude @ Apr 28th 2007 4:12PM]

John Doe, I'd rather be an asshole who's successfully lead several multi-billion dollar corps, than a really nice guy who's accomplished jack sh!t, like yourself.