Apple clears Jobs

December 30, 2006|By New York Times News Service

Apple Computer exonerated its chief executive, Steven P. Jobs, yesterday of any wrongdoing in a stock options backdating probe.

In a filing with the Securities and Exchange Commission, Apple said that while its investigation revealed that the company's stock option procedures "did not include sufficient safeguards to prevent manipulation," Jobs did not benefit financially from any questionable stock awards.

As a result of the internal investigation, Apple said it would record $84 million in expenses related to the options awards.

The news helped push shares of Apple up 4.85 percent, or $3.92, to close at $84.79. The share price fell as low as $76.77 earlier this week on reports that the investigation could reveal damaging information about the company's options practices.

Apple is among dozens of companies, many of them in Silicon Valley, that have come under scrutiny for assigning favorable grant dates to stock options to inflate their value.

The probe revealed curious irregularities in the way Apple granted stock options. For example, there was supposedly a special board meeting in 2001 to approve options grants, but auditors now say that meeting never took place. The SEC filing said that no current members of Apple's management were aware of the falsified meeting, however.

The special committee Apple commissioned to investigate its options awards issued a statement yesterday that was signed by two Apple board members: former vice president Al Gore, who chaired the special committee, and Jerome York, who heads the board's Audit and Finance Committee.

"The board of directors is confident that the company has corrected the problems that led to the restatement, and it has complete confidence in Steve Jobs and the senior management team," the statement said.

Apple, which is known for obsessively guarding information about new products, appears to have applied the same secrecy to its handling of the stock option issues. Before yesterday's filing, it had confined its public response to a few terse statements. This week it continued to maintain its silence as reports about possible falsified documents rattled shareholders.

"What we want a company to do is to get good information in the marketplace as soon as it has that information," said Patrick McGurn, executive vice president of Institutional Shareholder Services, which advises its clients on corporate governance issues, before Apple made yesterday's announcement. "Obviously, the information has dribbled in fits and starts out of Apple. It has been more of a piecemeal approach."

The company had previously said that Jobs knew of some backdated grants but that he did not knowingly receive any of them and had not benefited from the practice.

The options issues at Apple was first disclosed in June and came back into the spotlight this week. After the review of its options accounting practices, Apple said in October that while there had been 15 instances of backdating, the review had found no misconduct by any member of Apple's current management team.

The language of Apple's statement, coupled with the simultaneous resignation from the board of Fred D. Anderson, the company's former chief financial officer, led analysts to believe that Apple and Jobs were attempting to distance themselves from any blame in the case.

The filing yesterday revealed that Apple's investigation "raised serious concerns" about two former company officers, but it did not name them.

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