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Stock-option scandal stalks Apple chief Steve Jobs
2007-04-25
Apple's iconic chief executive Steve Jobs is being dragged toward the heart of a stock-options backdating scandal with potentially industry-changing implications, according to analysts. A former Apple executive who settled charges linked to stock-options fraud said Tuesday he warned Jobs about potential accounting problems related to the executive awards. The claims about Jobs' knowledge of the scheme came as Apple's former top lawyer and former head financial officer were charged in a civil suit by US federal regulators with participating in fraud related to multi-million dollar Apple stock option awards. "Everybody is pointing their fingers at Steve now," industry analyst Rob Enderle of Enderle Group told AFP. "You have to figure the guy who is monetarily benefiting from the whole thing, especially if he is a micro-manager, had to be the one driving it." Jobs, a notorious micro-manager, negotiated extensively regarding his stock package, according to Enderle. Jobs is famous for taking one dollar a year in salary and letting his fortune ride on Apple's value. Cupertino, California-based Apple declined to comment on claims that Jobs knew about the stock option awards in question and stressed that he was not named in the government suit filed Tuesday. "The Securities and Exchange Commission did not file any action against Apple or any of its current employees," Apple spokesman Steve Dowling told AFP. Dowling also pointed out the regulatory watchdog said it would not be bringing charges against Apple due to its "swift, extensive and extraordinary" cooperation with the stock option backdating probe. Jobs continues to have the support of Apple board members, including former US vice president Al Gore. Unlike many other corporations, Apple's fate is firmly entwined with that of its chief executive and any linking of Jobs to illegal backdating of stock options would rock the company, analysts say. "A company normally wants to distance itself from a troubled executive but it is hard to do with Apple," Enderle said. "It may be that whatever happens to Steve happens to Apple." The stock-option case has not hampered Apple's ability to produce and sell its mainstay iPod MP3 players and Macintosh computers. That could change if Jobs has to shift his energy from being Apple's superstar pitchman to defending himself in litigation. The recently introduced Apple TV set-top box to route video and films wirelessly from computers to televisions isn't selling well and studies show so many iPods have sold that the market is saturated. Apple plans to launch two models of its innovative iPhone in June, but critics worry the 499 and 599-dollar price tags and the exclusive service deal with Cingular telecommunications company will hamper sales. "Apple is betting an awful lot on the iPhone," Enderle said. "There may be some rocky roads ahead. The only thing to make it worse would be charges against Steve." Apple is among a host of technology firms vexed by allegations that an industry practice of recruiting and retaining talented workers with favorably backdated stock options violated financial accounting law. Awarding special stock options to top executives is common at many US companies, but it is improper to alter the dates on which the options were awarded without informing the SEC and investors. Tweaking the date of when an option was awarded can enrich the holder of the option if the award is "backdated" to a time when a company's share price was lower. "The days of free-floating options dates are probably over," analyst Michael McGuire of Gartner Research told AFP. The civil suit filed by the SEC claims ex Apple lawyer Nancy Heinen, 50, and former Apple chief financial officer Fred Anderson, 62, participated in a scheme to backdate two large stock option grants to top Apple management, including Jobs. Anderson has agreed to a settlement with the SEC that includes a payment of 3.5 million dollars. Anderson's lawyer said the executive "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," a statement said. Heinen's attorney denied that his client had backdated stock options or acted improperly.
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