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MacRumors
Dec 29, 2006, 11:47 AM
http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)

Today Apple released (http://www.apple.com/pr/library/2006/dec/29_10q_10k.html) both its tardy 10Q (for 2Q 2006) and 10K (for fiscal year 2006) reports to the SEC. Much of the attention of the press release was placed on the continuing Stock Options back-dating investigation.

According to the release, Apple found a total of $84 million in charges related to the case, which dates back to 1997, including $4 million in 2006 and $7 million in 2005. However, to put the issue in perspective, Apple's profits for 2005 and 2006 were $1 billion-plus each year, so the corrections represent less than 1% of Apple's profitability in those years.

In addition, Apple's board expressed confidence in CEO Steve Jobs, who was recently in headlines regarding some of the backdated options he received but never profited from.

ďThe special committee, its independent counsel and forensic accountants have performed an exhaustive investigation of Appleís stock option granting practices,Ē in a joint statement said Al Gore, chair of the special committee, and Jerome York, chair of Appleís Audit and Finance Committee. ďThe 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.Ē

Apple's stock has been traded heavily over the past few days, with the stock dipping as much as 6% before recovering on December 27th (Wednesday) (http://www.macrumors.com/pages/2006/12/20061227164408.shtml). As of this writing, Apple's stock (http://finance.yahoo.com/q?s=aapl) is up over 5%.



PlaceofDis
Dec 29, 2006, 11:49 AM
good news right?

lets hope these issues get resolved quickly.

Thanatoast
Dec 29, 2006, 11:51 AM
Huzzah! On with MWSF!

AidenShaw
Dec 29, 2006, 11:58 AM
In addition, Apple's board expressed confidence in CEO Steve Jobs, who was recently in headlines regarding some of the backdated options he received but never profited from.
Of course he didn't profit from them - when the stock dropped sharply the options went underwater.

They were exchanged, however, for restricted shares.

http://www.usatoday.com/money/industries/technology/2004-03-11-dirt-poor-jobs_x.htm

Posted 3/11/2004 11:59 AM

Apple CEO took $1 salary again in 2003

NEW YORK (Reuters) ó Apple Computer Chief Executive Steven Jobs took a $1 salary in 2003, as he has since 1998, and received $74.75 million in restricted stock in exchange for his outstanding stock options in March 2003.
The Cupertino, California company did not pay Jobs, who is also a co-founder of the company, any new stock options or cash bonus in 2003. No other executive received stock options in 2003, Apple said.

Jobs began taking a $1 salary one year after he returned to Apple in 1997, aiming to turn around the company he helped found. But over the years, other compensation for Jobs has been criticized, such as stock options and a $90 million jet.

The grant of restricted stock, which Jobs received in exchange for cancellation of 27.5 million stock options, vests three years from the date of the grant. The move, which Apple disclosed a year ago, was part of the company's effort to reduce the percentage of issued stock options as a total of options and shares outstanding.

So, please try to convince me that "exchanging" the options for a stock grant is not "profiting" from them.

Or, probably more to the point, convince the judges in the class action shareholder lawsuits that will surely come that exchanging the options for a $75M "grant" isn't profiting.

And, don't forget that in March 2003 that grant was 10 million shares - at today's stock prices it's about $850M.

cadillaccactus
Dec 29, 2006, 12:00 PM
i feel like mr steve has so much money already that it's wouldnt be worth the time/trouble to imbezzle from apple.

__________________

Digg my stories! (http://digg.com/users/cadillaccactus/news/submitted)

xPismo
Dec 29, 2006, 12:22 PM
Good to see. Sad to see the craze this has been on the TV networks. Of all the pundits I watched, they all failed to mention that no one has commented on record. . . bah.

mkrishnan
Dec 29, 2006, 12:26 PM
Putting aside the accounting issue, looks like a great Q2 for Apple! Healthy sales across markets for both the iPod and Mac lines. Although the same-three-month services sales related to the iPod seemed to be off. Hopefully that trend won't continue. Looks like they were down on desktops too, perhaps because of the transition, although they were up in Mac sales overall, so one could also interpret it as a healthy shift towards a richer mix of notebooks....

Looks good! Keep it coming.

kresh
Dec 29, 2006, 12:27 PM
You say that as if its a bad thing. :p

It's not a bad thing, but Steve's dry cleaning expenses are crazy when they visit. It's so hard to get the stains out of Steve's cashmere turtleneck shirts.

Multimedia
Dec 29, 2006, 12:30 PM
I do not believe anyone at Apple would ever intentionally do anything against the rules for their own personal advantage. I believe they are all very honorable and honest people. Anything they may have done "wrong" was probably an innocent mistake.

freeny
Dec 29, 2006, 12:35 PM
I do not believe anyone at Apple would ever intentionally do anything against the rules for their own personal advantage. I believe they are all very honorable and honest people. Anything they may have done "wrong" was probably an innocent mistake.

Dont ever assume this of anyone! not even your own mother;)

Any who, glad this is over, lets move on...

BornAgainMac
Dec 29, 2006, 12:52 PM
It looks like the mess is over with this scandal. It made some great press headlines. I want to see additional headlines about Apple in a more positive light in the future.

Peace
Dec 29, 2006, 12:53 PM
Man..MacWorld 2007 can't come soon enough..

Apple restates earnings that reflect a $84 million write-off while other silicon valley companies are doing $600 million write-offs and folks here call Gore and Jobs crooks..

You people should be ashamed of yourselves..

And I might add that $84 million is chump change compared to the BILLIONS Microsoft has paid out in fines etc.

And Aiden.

Of course he didn't profit from them - when the stock dropped sharply the options went underwater.

They were exchanged, however, for restricted shares.

http://www.usatoday.com/money/industries/technology/2004-03-11-dirt-poor-jobs_x.htm

Posted 3/11/2004 11:59 AM

Apple CEO took $1 salary again in 2003

NEW YORK (Reuters) — Apple Computer Chief Executive Steven Jobs took a $1 salary in 2003, as he has since 1998, and received $74.75 million in restricted stock in exchange for his outstanding stock options in March 2003.
The Cupertino, California company did not pay Jobs, who is also a co-founder of the company, any new stock options or cash bonus in 2003. No other executive received stock options in 2003, Apple said.

Jobs began taking a $1 salary one year after he returned to Apple in 1997, aiming to turn around the company he helped found. But over the years, other compensation for Jobs has been criticized, such as stock options and a $90 million jet.

The grant of restricted stock, which Jobs received in exchange for cancellation of 27.5 million stock options, vests three years from the date of the grant. The move, which Apple disclosed a year ago, was part of the company's effort to reduce the percentage of issued stock options as a total of options and shares outstanding.

So, please try to convince me that "exchanging" the options for a stock grant is not "profiting" from them.

Or, probably more to the point, convince the judges in the class action shareholder lawsuits that will surely come that exchanging the options for a $75M "grant" isn't profiting.

And, don't forget that in March 2003 that grant was 10 million shares - at today's stock prices it's about $850M.


The company also reported today, as it had previously, that Jobs never exercised his own options. Along with an earlier set of 10 million options, the 7.5 million options from 2001 were cancelled in March 2003, when Jobs was instead given 5 million shares of restricted stock, the company said.

So canceling 17.5 million shares and getting 5 million instead is what Aiden?

Sure isn't $850 million..

Clive At Five
Dec 29, 2006, 01:10 PM
Damn, I almost wish stocks would have dropped lower... I would have bought!

On the other hand, if MacWorld sucks, I'll have a second opportunity. *crosses fingers*

;)

-Clive

tcrab
Dec 29, 2006, 01:16 PM
Well I'm glad Apple got away with this one with a slap on the wrist. I'd hate to see Jobs go. At least they won't do that again.

I wonder if anyone is looking into Microsoft and see if there are some inequalities.

AidenShaw
Dec 29, 2006, 01:24 PM
The company also reported today, as it had previously, that Jobs never exercised his own options.
No argument, the options were exchanged for a restricted grant.

That's a lot different from claiming that Jobs never got anything for the options.

Along with an earlier set of 10 million options, the 7.5 million options from 2001 were cancelled in March 2003, when Jobs was instead given 5 million shares of restricted stock, the company said.

So canceling 17.5 million shares and getting 5 million instead is what Aiden?

Sure isn't $850 million..
The USA Today article said that 27.5 million options were cancelled in exchange for a $75 million grant. Since Apple stock has split since then, the 5 million shares are now 10 million. (I used split-adjusted prices for 2003.)

The only point to clarify is that a little less than a third of the options that Jobs exchanged were tainted by this scandal, therefore only about $250M of his profit is tainted.

Peace
Dec 29, 2006, 01:32 PM
No argument, the options were exchanged for a restricted grant.

That's a lot different from claiming that Jobs never got anything for the options.


The USA Today article said that 27.5 million options were cancelled in exchange for a $75 million grant. Since Apple stock has split since then, the 5 million shares are now 10 million. (I used split-adjusted prices for 2003.)

The only point to clarify is that a little less than a third of the options that Jobs exchanged were tainted by this scandal, therefore only about $250M of his profit is tainted.

Well the USA Today article differs from Apple's statement.

Apple stated 17.5 million shares were cancelled and Jobs was given 5 million in restricted stock.

That differs greatly from "27.5 million options were cancelled in exchange for a $75 million grant."

The stock split was in 2005.AFTER Jobs took the exchange of stock.There is NO WAY a person can take stock in 2003 knowing it was going to go up and split 2 years later.

AidenShaw
Dec 29, 2006, 01:40 PM
Well the USA Today article differs from Apple's statement.

Apple stated 17.5 million shares were cancelled and Jobs was given 5 million in restricted stock.

That differs greatly from "27.5 million options were cancelled in exchange for a $75 million grant."

That was 5 million shares (at about $15 then), or $75M. The shares were a grant - not options, an outright gift (when they vested).

http://www.appleinsider.com/article.php?id=1621

Apple's Jobs pays $295M in taxes on 10M vested shares

By Kasper Jade

Published: 06:00 PM EST
Apple Computer chief executive Steve Jobs this month used over 4.5M of the 10M restricted shares owed to him by the company to pay income and other employment taxes applicable to those shares, AppleInsider has discovered.


http://www.apple.com/pr/library/2003/mar/20governance.html

The second measure is for Apple CEO Steve Jobs to voluntarily exchange his 27.5 million stock options for a new grant of 5 million restricted shares that will vest on the third anniversary of the grant.

USA Today is essentially correct.

Peace
Dec 29, 2006, 01:45 PM
This is useless Aiden.Just like Multimedia said.A tempest in a Teapot..

Move along..Nothing to see here :)

MasterJediDan
Dec 29, 2006, 02:00 PM
Hooray!! Now Apple doesn't have to worry about losing Jobs again. When they pushed him out the first time, all heck broke loose at Apple, and they started losing out against Microsoft. But now that Steve is back, Apple is gaining significant ground against Microsoft. If they lost him again I would be very worried about what they would do next.

hagjohn
Dec 29, 2006, 02:07 PM
Huh? That was the end of the Apples "internal" investigation about the matter. That has nothing to do with a Gov't investigation.

Well I'm glad Apple got away with this one with a slap on the wrist. I'd hate to see Jobs go. At least they won't do that again.

I wonder if anyone is looking into Microsoft and see if there are some inequalities.

AidenShaw
Dec 29, 2006, 02:19 PM
This is useless Aiden. Just like Multimedia said. A tempest in a Teapot...
True, it will be the Securities and Exchange Commission's investigation that will be more important, and all the shareholder class action suits that will have a lasting effect.

But, as long as people claim that "It's OK, Steve didn't sell the options" I hope that people will point out that it's not OK. Such a claim is about as valid as saying that it's OK to rob a bank if you don't spend the money. ;)

I'll also point out that the record shows that Steve traded options, including the tainted ones, for an outright grant of millions of shares. That makes it hard to claim that he didn't benefit.

If the investigations show that Jobs knew of the falsification of records, and that therefore he was involved in covering up the misdeeds - then it will be bye-bye Steve.

gnasher729
Dec 29, 2006, 02:27 PM
Or, probably more to the point, convince the judges in the class action shareholder lawsuits that will surely come that exchanging the options for a $75M "grant" isn't profiting.

And, don't forget that in March 2003 that grant was 10 million shares - at today's stock prices it's about $850M.

It's only $850 million because the same Steve Jobs that is apparently annoying you so much has increased the market capitalization of the company about tenfold to a bit over 70 billion dollars.

And it is only small change to the 3500 million that Disney paid him for his share of Pixar.

jragosta
Dec 29, 2006, 02:34 PM
True, it will be the Securities and Exchange Commission's investigation that will be more important, and all the shareholder class action suits that will have a lasting effect.

But, as long as people claim that "It's OK, Steve didn't sell the options" I hope that people will point out that it's not OK. Such a claim is about as valid as saying that it's OK to rob a bank if you don't spend the money.


You're forgetting one thing.

Steve traded 17 milion options that were under water for a stock grant. If the options had not been backdated, they would have been EVEN MORE underwater when they were traded for the stock grant. Backdating the options merely made them a little closer to being of value.

So, he traded worthless options for a stock grant. If there had been no backdating, he presumably would have traded options that were even more worthless for a stock grant.

Tempest in a teapot.

Gusman
Dec 29, 2006, 02:45 PM
True, it will be the Securities and Exchange Commission's investigation that will be more important, and all the shareholder class action suits that will have a lasting effect.

But, as long as people claim that "It's OK, Steve didn't sell the options" I hope that people will point out that it's not OK. Such a claim is about as valid as saying that it's OK to rob a bank if you don't spend the money. ;)

I'll also point out that the record shows that Steve traded options, including the tainted ones, for an outright grant of millions of shares. That makes it hard to claim that he didn't benefit.

If the investigations show that Jobs knew of the falsification of records, and that therefore he was involved in covering up the misdeeds - then it will be bye-bye Steve.

Interesting in that you seem aware of a number of facts yet reach the conclusion you have.

Did you read the official filing? Notice this?


The grant dated October 19, 2001 was originally approved at a Board meeting on August 29, 2001, with an exercise price of $17.83. The terms of the grant, however, were not finalized until December 18, 2001. The grant was dated October 19, 2001, with an exercise price of $18.30.

Seems pretty clear to me that the Board was in the loop, just the paperwork details messed up. Guidelines for options were changing significantly over the years involved due to abuse. Do I as a apple shareholder think this is significant, or even abuse? no way . . . add up all the compensation, perks etc that S Jobs has received and the shareholders would have tripled it for the results he has guided the company towards. Shareholder lawsuit, LOL, ya I guess the $6 to $85 return on stock price in 3 years isn't enough.

dongmin
Dec 29, 2006, 02:50 PM
True, it will be the Securities and Exchange Commission's investigation that will be more important, and all the shareholder class action suits that will have a lasting effect.

But, as long as people claim that "It's OK, Steve didn't sell the options" I hope that people will point out that it's not OK. Such a claim is about as valid as saying that it's OK to rob a bank if you don't spend the money. ;)

I'll also point out that the record shows that Steve traded options, including the tainted ones, for an outright grant of millions of shares. That makes it hard to claim that he didn't benefit.

If the investigations show that Jobs knew of the falsification of records, and that therefore he was involved in covering up the misdeeds - then it will be bye-bye Steve.You're missing a few facts:

The options were a form of compensation that Apple gave to Jobs since he wasn't taking any salary. The correct date for the options was Dec. 18, 2001 when AAPL was $21.01; the falsified date was Oct. 19 when AAPL was $18.03. In March of 2003 when Jobs canceled his options in exchange for the stock grant, AAPL was hovering around $15 so Jobs's options were worth ZERO at that point.

I fail to see how Jobs profited from the backdating of the options since AAPL at the time of the transaction was actually lower than the $18.03 of 9/19/03. Apple gave him the stock grant in exchange for the options because his earlier compensation was worth nothing.

VIREBEL661
Dec 29, 2006, 02:56 PM
Well said dashiel. Well said. :)

A lot of this scandal is somewhat overblown - I think it'll be fine... You have to wade through a lot of FUD - Apple news seems to always be higher profile than others - as long as Apple keeps on truckin', I'm a happy camper...

islanders
Dec 29, 2006, 04:12 PM
I don’t understand anything about stock options, so let me ask.

Did Jobs profit from this back dating while shareholders were denied, or was this some kind of way to get out of paying taxes, or anything unethical?

If there was a discrepancy was this acknowledged and whatever the amount was corrected, and when did this correction happen if there was in fact a discrepancy? 2006?

Sounds like they straightened this out before a federal investigation, so everything has been resolved from a legal point of view.

Should someone call CNN and let them know Mac Rumors has fully exonerated Jobs and Gore so there is nothing else to report?

As long as he doesn’t get handcuffed, hosed down and put in a jump suit with flip flops no one else is going to care about any of this except Mac enthusiast.

itcheroni
Dec 29, 2006, 04:38 PM
I don’t understand anything about stock options, so let me ask.

Did Jobs profit from this back dating while shareholders were denied, or was this some kind of way to get out of paying taxes, or anything unethical?

If there was a discrepancy was this acknowledged and whatever the amount was corrected, and when did this correction happen if there was in fact a discrepancy? 2006?

Sounds like they straightened this out before a federal investigation, so everything has been resolved from a legal point of view.

Should someone call CNN and let them know Mac Rumors has fully exonerated Jobs and Gore so there is nothing else to report?

As long as he doesn’t get handcuffed, hosed down and put in a jump suit with flip flops no one else is going to care about any of this except Mac enthusiast.

I'll try to summarize the basic info as best as I can; people feel free to correct my mistakes(as if I needed to say).

Options are options to buy a stock. For example, Aapl is $80 but you don't want to buy 100 shares of Aapl for $8000. You can buy the option to buy Aapl at $80 for (let's say) $5. So you will pay $500($5x100) for the option to buy 100 shares of Aapl at $80. Why? Because if Aapl goes up to $90, you can exercise the option and buy Aapl for $80 and immediately sell it for $90 or just keep it. Or you can sell the option itself which has also gone up proportionately.

CEOs are often paid in options, that's why Jobs works for a $1 salary, and it's what motivates them to try and bring up the stock.

The issue most likely is not be whether Jobs profited from the backdating but whether that backdating was illegal. If so, Jobs and others may be liable for wrongdoing. All today's report says is that they(Apple) are confident in no wrongdoing. It essentially has no effect other than to give stockholders more confidence in holding.

By the way, an "honest" mistake concerning statutory violations usually just equates to pleading guilty. A violation is a violation. The judge may of course exercise discretion based on the circumstances, but s/he still must state their reasoning.

islanders
Dec 29, 2006, 05:03 PM
I'll try to summarize the basic info as best as I can; people feel free to correct my mistakes(as if I needed to say).

Options are options to buy a stock. For example, Aapl is $80 but you don't want to buy 100 shares of Aapl for $8000. You can buy the option to buy Aapl at $80 for (let's say) $5. So you will pay $500($5x100) for the option to buy 100 shares of Aapl at $80. Why? Because if Aapl goes up to $90, you can exercise the option and buy Aapl for $80 and immediately sell it for $90 or just keep it. Or you can sell the option itself which has also gone up proportionately.

CEOs are often paid in options, that's why Jobs works for a $1 salary, and it's what motivates them to try and bring up the stock.

The issue most likely is not be whether Jobs profited from the backdating but whether that backdating was illegal. If so, Jobs and others may be liable for wrongdoing. All today's report says is that they(Apple) are confident in no wrongdoing. It essentially has no effect other than to give stockholders more confidence in holding.

By the way, an "honest" mistake concerning statutory violations usually just equates to pleading guilty. A violation is a violation. The judge may of course exercise discretion based on the circumstances, but s/he still must state their reasoning.



Thanks for the explanation. I sure am learning a lot here.

So if they were dated back when they were at worth less, then they would be worth more at the date they were sold or traded for cash or some other commodity of value?

Kind of convenient that the two people who were responsible are no longer working there.

Wonder what they might have to say?

itcheroni
Dec 29, 2006, 05:37 PM
Thanks for the explanation. I sure am learning a lot here.

So if they were dated back when they were at worth less, then they would be worth more at the date they were sold or traded for cash or some other commodity of value?

Kind of convenient that the two people who were responsible are no longer working there.

Wonder what they might have to say?

I think the problem is that they fabricated board approval. If anyone knows the reasoning for this, please advise because it doesn't make sense to me. Could they just not get a meeting together or something? How will they explain to the SEC that they didn't know they were doing anything illegal when they're falsifying records?

Doctor Q
Dec 29, 2006, 06:49 PM
The political discussion based on this news story is now in a separate thread. Please use this thread for discussion about Apple and its finances, and the separate thread for the political discussion. Posts made in the wrong forum will be removed.

Thank you.

cygnusx1
Dec 29, 2006, 08:32 PM
Sometime next week, probably Wednesday or Thursday evening either the U.S. Attorney or the SEC will file complaints and subpoena Fred Anderson, and Nancy Heinen (maybe also Jerome York and the 2 other members of the 2001 Executive Compensation Committee)(maybe they'll just convene a grand jury). Anderson is definitely up the creek because he signed the 2002 10K that stated that the 7,500,000 options granted to Jobs were priced as of the date of the grant. But we now know that the options were granted (if you can call it that) in December 2002. Moreover, it is possible that, notwithstanding the statements issued by the Board today, the Executive Compensation Committee never agreed to grant the options at the Board meeting in August 2001. Ergo, Jobs, as Chairman of the Board, granted the options to himself in December 2001 or later and then conveniently 'recommended' to Anderson or Heinen that they be priced just prior to the release of the original ipod. (If that's the case then all of the 2001 Board Members have got a huge problem for failure to protest/resign when the public filings were made in '02).
Then when they've got Anderson or Heinen sweating some possible jail time, the prosecutors will try to strike a deal for their testimony that Jobs was aware and directed the backdating of options to himself. If they are able to get that, the rest should be fairly academic. Although the options were underwater at the time that they were cancelled they had ten year expiration dates and were worth a lot of money (Black Scholes). The options were cancelled and replaced with restricted stock, which restricted stock Jobs recently cashed out for several hundred million dollars.
It's unfortunate that this company's going to get crushed. They are after all one of the few natural enemies for Microsoft. But if the DOJ and SEC let this one go, they may as well pack up and go home, b/c there are hundreds of other cases they are investigating that are not nearly as egregious or as high profile (prosecutors love to take down the big dog) as this one.
Oh, plus there are the Pixar issues that Jobs has to deal with. Looks ugly.

MasterJediDan
Dec 29, 2006, 09:42 PM
Huh? That was the end of the Apples "internal" investigation about the matter. That has nothing to do with a Gov't investigation.

yeah, but at least it's good news from somebody. :cool: Hopefully everything is as Apple says it is so we can cheer on Jobs at MWSF.

islanders
Dec 29, 2006, 10:15 PM
If this was all resolved and shareholders didnít get cheated then we canít be talking jail time here for anyone over one documet.

I canít see shareholders filing anything against Jobs. Why on earth would they do that?

But perhaps the ones that bought and sold during this time didnít benefit from the late correction some 4 years later, and they might have a gripe? But if they do, Apple is a reputable company and always corrects any mistakes.

Thatís the only conflict I see, but mistakes can happen also, and a few documents is a lot different that a track record of greed and corruption where innocent inversters were exploited out of their life savings.

AidenShaw
Dec 29, 2006, 10:29 PM
If this was all resolved and shareholders didn’t get cheated then we can’t be talking jail time here for anyone over one documet.
Well, the lawyers filing the class action lawsuits will disagree.

I can’t see shareholders filing anything against Jobs. Why on earth would they do that?
$

Apple is a reputable company and always corrects any mistakes.
************. Every class action lawsuit that Apple has lost is proof that they only care about the profit/loss equation....

islanders
Dec 29, 2006, 11:01 PM
"AidenShaw;3191596]Well, the lawyers filing the class action lawsuits will disagree."


Not when the grievance has been settled in full. It’s called mitigation.

"$"


Exactly, they want their stocks to plunge, duhh. Thaks for making my point.


"************. Every class action lawsuit that Apple has lost is proof that they only care about the profit/loss equation...."


Yeah, I see your point now. No, specifics, just BS, lets see you and some others provide some individuals who have been convinced for one document?

What does a class action lawsuite have to do with any of this?

Like I said specifics please, or your the one who is full of it.

Flowbee
Dec 29, 2006, 11:01 PM
Speaking of lawsuits, the SEC filing also reveals information about three new ones: One over iPod integration with iTunes; Another claiming patent infringment (http://podophile.com/2006/12/29/nike-ipod-lawsuit-revealed-in-apples-sec-filing/) over the Nike+iPod Sport Kit; and a third that deals with the iBook G4's flaky motherboard.

Read the news story here (http://www.siliconvalley.com/mld/siliconvalley/news/16346794.htm).

islanders
Dec 29, 2006, 11:26 PM
Speaking of lawsuits, the SEC filing also reveals information about three new ones: One over iPod integration with iTunes; Another claiming patent infringment (http://podophile.com/2006/12/29/nike-ipod-lawsuit-revealed-in-apples-sec-filing/) over the Nike+iPod Sport Kit; and a third that deals with the iBook G4's flaky motherboard.

Read the news story here (http://www.siliconvalley.com/mld/siliconvalley/news/16346794.htm).

Thanks for the link but that sounds like good news to me. When people complain about Apple having a monopoly, thatís the kind of problems every company wants.

The rest of it sounds like business as usual, and each discrepancy has nothing to do with each other.

gnasher729
Dec 30, 2006, 07:47 AM
I think the problem is that they fabricated board approval. If anyone knows the reasoning for this, please advise because it doesn't make sense to me. Could they just not get a meeting together or something? How will they explain to the SEC that they didn't know they were doing anything illegal when they're falsifying records?

Depends how this happens. A decision was made to grant share options on a certain date. It can't have been done against the will of the board, because they would have asked questions later - maybe everyone was asked over the phone informally whether they agreed, even though a board meeting was required. (Even if the board at a company is bought and agrees to everything the CEO tells them, the board members would still raise a major stink if we weren't asked to agree).

Someone then had to fill out the paper work. That person might have known that approval in a formal board meeting was legally required, and therefore made the wrong assumption that the formal board meeting had actually happened and wrote everything down accordingly.

So person A did not know that a formal board meeting was the legal requirement. Person B who did the paperwork knew it was a legal requirement and therefore assumed it had happened. If Person B had bothered to ask this would have happened: "You had a formal board meeting, didn't you?" "No, we didn't, that's not required." "Oh yes, it is required, I can't fill out the forms otherwise." "Damned, I have to get all these people together next week then." and Steve Jobs would have got the grant a week later.

But you can be sure that all board members had been asked to agree to the grant and did agree.

gnasher729
Dec 30, 2006, 07:53 AM
But perhaps the ones that bought and sold during this time didnít benefit from the late correction some 4 years later, and they might have a gripe?

The ones who bought and sold years ago assumed that the company was worth a tiny bit more than it actually was. So they paid a little bit too much for the shares, but they also received a little bit too much when they sold, so there was no actual harm done.

The only ones who would have been harmed were those who bought before Apple reported problems of unknown size; and were holding shares when Apple first announced the problems. As Apples share price went, all these people made enormous profits.

Gusman
Dec 30, 2006, 08:02 AM
. . . Moreover, it is possible that, notwithstanding the statements issued by the Board today, the Executive Compensation Committee never agreed to grant the options at the Board meeting in August 2001. . . .


I think you forgot about the part where Gore and all current directors are jailed for continuing to lie and coverup, pretty courageous of them to stick their integrety, fortune as well as their freedom on the line just to buy S. Jobs another 6 months before jail time sets in.

You have any other imagined, what if senerios you want to share with us?

cygnusx1
Dec 30, 2006, 08:32 AM
Gore was not on the board at the time of the grants. So he doesn't have first hand knowledge about what occurred. York was on the board at the time and would have an incentive to cover his @ss.
Heinen left the company in May and has not been available to provide input into the internal investigation. Given that she (the legal department) was probably responsible for drafting the board resolutions, her input/testimony will be necessary to clear things up.

But at the very least based on the info provided by the Board yesterday and based on public filings it appears that there is a high probability that the following is accurate: (i) Jobs received, with knowledge, backdated options; (ii) which backdated options were later exchanged for restricted stock, and (iii) Jobs recently cashed out the restricted stock for hundreds of millions of dollars, thereby profiting from the award of backdated options.I
If any of this is incorrect, please advise.

Gusman
Dec 30, 2006, 08:46 AM
Gore was not on the board at the time of the grants. So he doesn't have first hand knowledge about what occurred. York was on the board at the time and would have an incentive to cover his @ss.
Heinen left the company in May and has not been available to provide input into the internal investigation. Given that she (the legal department) was probably responsible for drafting the board resolutions, her input/testimony will be necessary to clear things up.

But at the very least based on the info provided by the Board yesterday and based on public filings it appears that there is a high probability that the following is accurate: (i) Jobs received, with knowledge, backdated options; (ii) which backdated options were later exchanged for restricted stock, and (iii) Jobs recently cashed out the restricted stock for hundreds of millions of dollars, thereby profiting from the award of backdated options.I
If any of this is incorrect, please advise.


The 3 points above are uncontested. Though I should add, Jobs received the restricted stock grant as compensation for his work at Apple. Basically, he does not draw a salary. The option grants were still worthless at the time of their being surrendered. Given the success of his work, even though the stock was down during that period (there was a lot of other stuff impacting the stock market going on that Apple had no control over, e.g. 9-11, Iraq invasion, etc) the Board chose to give him something of guaranteed minimum value. As with any shareholder he has enjoyed the 10-15 fold increase in stock price since.

The Board of Apple included this direct quote in their filling

The grant dated October 19, 2001 was originally approved at a Board meeting on August 29, 2001, with an exercise price of $17.83.


Do you question whether they included this? If not, the current Board, is reponsible for its accuracy. If true, while not eliminating the seriousness of falsifing a Board meeting, it does remove the question of whether the company knowingly and intentionally agreed to the grant, whether it was dated August, December, or October.

islanders
Dec 30, 2006, 09:51 AM
So the board should have simply wrote him a check instead of backdating options?

And has it been resolved? Do any of the shareholders or ex-shareholders have a grievance? And will this be settled in a civil suit.

I still havenít seen the proof or a criminal case here that would result in drastic punishment, as some of you are suggesting. So, Iíll ask again, what other employees and CEO of a company like Apple has been convicted and sentenced for the exact same discrepancies?

This is looking more like a fine to me, and a ďstrike oneĒ warning.

IJ Reilly
Dec 30, 2006, 10:41 AM
So the board should have simply wrote him a check instead of backdating options?

In effect, yes. The company needs to account for the value of "in the money" options as cash compensation, and therefore as an expense. They pull the back-dating trick in an effort to avoid full disclosure.

And has it been resolved? Do any of the shareholders or ex-shareholders have a grievance? And will this be settled in a civil suit.

I still havenít seen the proof or a criminal case here that would result in drastic punishment, as some of you are suggesting. So, Iíll ask again, what other employees and CEO of a company like Apple has been convicted and sentenced for the exact same discrepancies?

This is looking more like a fine to me, and a ďstrike oneĒ warning.

I absolutely would not count on that. Four shareholder suits have been combined into one class action which will be heard in a court in San Jose. Further, the SEC has not been heard from yet, so this is by no means over. If federal prosecutors decide to run with any of this, they will almost certainly latch onto the statement in Apple's report that Steve Jobs knew about the back-dating, but claimed to have no understanding of the accounting implications. This strains belief, and sounds suspiciously like the Ken Lay defense. It didn't work for Lay, where far more complicated financial dealings were involved, and I would not expect it to work for Jobs.

islanders
Dec 30, 2006, 11:13 AM
In effect, yes. The company needs to account for the value of "in the money" options as cash compensation, and therefore as an expense. They pull the back-dating trick in an effort to avoid full disclosure.



I absolutely would not count on that. Four shareholder suits have been combined into one class action which will be heard in a court in San Jose. Further, the SEC has not been heard from yet, so this is by no means over. If federal prosecutors decide to run with any of this, they will almost certainly latch onto the statement in Apple's report that Steve Jobs knew about the back-dating, but claimed to have no understanding of the accounting implications. This strains belief, and sounds suspiciously like the Ken Lay defense. It didn't work for Lay, where far more complicated financial dealings were involved, and I would not expect it to work for Jobs.




Thanks for the response.

But what happened to Enron is not the same situation at all with Apple.

This is an isolated event, and I wish someone could help put this into context.

Apple has admitted the discrepancy, has resolved the financial statement, and has the capacity to resolve any civil law suite. Enron went bankrupt and knowingly swindled people out of their life savings.

So wouldnít a fine and warning be appropriate?

mccoma
Dec 30, 2006, 11:41 AM
If you take a survey of the companies in silicon valley that are having issues (it looks like the count is now in the hundreds), Apple is probably the least of the SEC worries. The adjusted filing was less that 1% of Apple's profits over the time period. Apple actually started their own probe and (skip the politics on this one) had a former VP sign off on it. It looks like the fall guys have already been identified and the current people are ok.

This is not Enron or Worldcom. Those killed people's retirement funds. Apple had a blip and looks like it is headed back up.

In the coming weeks you are going to see news from a lot of other companies and their news will not be that rosy.

IJ Reilly
Dec 30, 2006, 11:48 AM
Thanks for the response.

But what happened to Enron is not the same situation at all with Apple.

This is an isolated event, and I wish someone could help put this into context.

Apple has admitted the discrepancy, has resolved the financial statement, and has the capacity to resolve any civil law suite. Enron went bankrupt and knowingly swindled people out of their life savings.

So wouldn’t a fine and warning be appropriate?

Who knows? We're in an entirely new environment (post-Enron) where board room misdealing are concerned. The Enron situation itself was obviously different, and far, far more serious -- but the Jobs defense is eerily similar. If Jobs gets caught in a web of "should have known," or even worse, "did know but claims ignorance," then I can see him being forced to step down. We're obviously not there yet, but keep in mind admitting wrongdoing is not the same as being exonerated for wrongdoing. Apple can't give themselves a pass. Only the SEC and the courts can do that.

IJ Reilly
Dec 30, 2006, 11:55 AM
If you take a survey of the companies in silicon valley that are having issues (it looks like the count is now in the hundreds), Apple is probably the least of the SEC worries. The adjusted filing was less that 1% of Apple's profits over the time period. Apple actually started their own probe and (skip the politics on this one) had a former VP sign off on it. It looks like the fall guys have already been identified and the current people are ok.

This is not Enron or Worldcom. Those killed people's retirement funds. Apple had a blip and looks like it is headed back up.

In the coming weeks you are going to see news from a lot of other companies and their news will not be that rosy.

True, but Apple being in even worse company does not improve their situation where the law is concerned, and all the mea culpas in the world don't cut much ice with federal prosecutors. They very well might want to make an example of somebody, preferably a prominent somebody, and Apple and Steve Jobs might just be the big fish they're looking for. We just don't know.

islanders
Dec 30, 2006, 12:17 PM
Who knows? We're in an entirely new environment (post-Enron) where board room misdealing are concerned. The Enron situation itself was obviously different, and far, far more serious -- but the Jobs defense is eerily similar. If Jobs gets caught in a web of "should have known," or even worse, "did know but claims ignorance," then I can see him being forced to step down. We're obviously not there yet, but keep in mind admitting wrongdoing is not the same as being exonerated for wrongdoing. Apple can't give themselves a pass. Only the SEC and the courts can do that.

No way Jobs is going to be asked to step down. Ainít gunna happen.

Me asking what the appropriate penalty for this in context to similar situations, should not suggest that I think they have been fully exonerated by SEC.

I donít see the connection to Enron.

Yeah, Jobs is a big dog, but he has teeth too, and isnít going to be pushed around by an overzealous prosecution.

This is a very legitimate company.

islanders
Dec 30, 2006, 12:36 PM
By the way I found this on the AP yesterday. After all the hype, smoke and mirrors, this is apparently how other similar companies were reprimanded.

ďDozens of companies already have been forced to restate their earnings, erasing some of their earlier recorded profits, after their stock-option shenanigans came to light.Ē

In a lot of ways, situations like this, any publicly is good publicity. The only reason this is making news is because of the popularity of Jobs and Apple products.

IJ Reilly
Dec 30, 2006, 12:46 PM
No way Jobs is going to be asked to step down. Ain’t gunna happen.

Is that a guarantee? Can I have it writing? Will you pay me when my Apple stock declines if Jobs is forced out?

Me asking what the appropriate penalty for this in context to similar situations, should not suggest that I think they have been fully exonerated by SEC.

I don’t see the connection to Enron.

Yeah, Jobs is a big dog, but he has teeth too, and isn’t going to be pushed around by an overzealous prosecution.

This is a very legitimate company.

A very legitimate company that just happens to have been caught doing something illegal?

None of us can pretend to know what will happen next. One of them could be Jobs stepping down. Is that likely? Probably not. Is it possible? Absolutely.

IJ Reilly
Dec 30, 2006, 12:52 PM
By the way I found this on the AP yesterday. After all the hype, smoke and mirrors, this is apparently how other similar companies were reprimanded.

Or like this:

http://www.californiahealthline.org/index.cfm?action=dspItem&itemID=126620&changedID=125882

Sound at all familiar?

AidenShaw
Dec 30, 2006, 01:04 PM
Or like this:

http://www.californiahealthline.org/index.cfm?action=dspItem&itemID=126620&changedID=125882

Sound at all familiar?

Spooky, just replace "UnitedHealth" with "Apple Computer", and "McQuire" with "Jobs".

It's the same story - except that Jobs hasn't been forced to resign yet.

islanders
Dec 30, 2006, 01:20 PM
Or like this:

http://www.californiahealthline.org/index.cfm?action=dspItem&itemID=126620&changedID=125882

Sound at all familiar?

Thanks for the infoÖ

ďMcGuire holds $1.1 billion in potentially backdated stock options.Ē

"The report found that the compensation committee of the UnitedHealth board was not informed about the dates on the stock options and that the board was not informed of the full extent of the financial relationships between McGuire and William Spears, chair of the committee.Ē

"It might be seen as better than the worst-case scenario. If Hemsley had left too, many investors would have seen this as a complete leadership disruption"

This looks the board didnít approve the options, so thatís different.

Apparently Jobs didnít profit from this in the same way.

The company was also concerned how the lack of leadership would affect them. And when you assess Apple, S. Jobs stepping down would be a last resort. Thatís why the board expressed their confidence in him.

Apple doesnít sell health insurance. If you look at Donald Trump, for example, he makes hundreds of millions just by letting developers use his name for hotels and whatnot. I donít like Trump, but this is the same kind of relationship for Apple and Jobs.

I also never said everyone was fully exonerated and I havenít been the one suggesting anyone is going to jail or stepping down, without some kind of reasoning to back it up.

I see no reason this will be more than a fine.

IJ Reilly
Dec 30, 2006, 02:12 PM
This looks the board didnít approve the options, so thatís different.

Proper board approval is also very much an issue in the Apple situation!

Apparently Jobs didnít profit from this in the same way.

Personal profit isn't the main issue. Correct financial reporting is. If it can be shown that Jobs knew that the back-dated options (not just his!) should have been reported as expenses in the company's balance sheet, then his goose is almost certainly cooked. The problem is, it should not be hard to demonstrate that he knew, or at least should have known. The effort to blame all of this on two departed execs is probably not going to be enough to save him if the feds decide to pursue this issue.

The company was also concerned how the lack of leadership would affect them. And when you assess Apple, S. Jobs stepping down would be a last resort. Thatís why the board expressed their confidence in him.

Apple doesnít sell health insurance. If you look at Donald Trump, for example, he makes hundreds of millions just by letting developers use his name for hotels and whatnot. I donít like Trump, but this is the same kind of relationship for Apple and Jobs.

I also never said everyone was fully exonerated and I havenít been the one suggesting anyone is going to jail or stepping down, without some kind of reasoning to back it up.

I see no reason this will be more than a fine.

Unfortunately, I can see plenty of reasons why it could turn far less than fine, and so can quite a number of people who understand these issues. The feds are not going to care two hoots about how important Jobs is to Apple.

Bottom line: I can't afford wishful thinking. I've got too much of my own money at stake.

islanders
Dec 30, 2006, 02:25 PM
Proper board approval is also very much an issue in the Apple situation!



Personal profit isn't the main issue. Correct financial reporting is. If it can be shown that Jobs knew that the back-dated options (not just his!) should have been reported as expenses in the company's balance sheet, then his goose is almost certainly cooked. The problem is, it should not be hard to demonstrate that he knew, or at least should have known. The effort to blame all of this on two departed execs is probably not going to be enough to save him if the feds decide to pursue this issue.



Unfortunately, I can see plenty of reasons why it could turn far less than fine, and so can quite a number of people who understand these issues. The feds are not going to care two hoots about how important Jobs is to Apple.

Bottom line: I can't afford wishful thinking. I've got too much of my own money at stake.


I was saying is that the shareholders arenít going to want him to step down. He might get fed up with them, and whatever they take out of his pocket with a lawsuit, he can demand twice as much the next year, cash.

I think this is why the board is supporting him.

Iím not suggesting how anyone should invest their own money.

Iím just not jumping to conclusions.

Peace
Dec 30, 2006, 02:34 PM
[snippet]
Proper board approval is also very much an issue in the Apple situation!








The Apple board DID approve it.The official date is whats wrong.

Apple Corps
Dec 30, 2006, 02:57 PM
In the bigger scheme of things this may wind up being a very inexpensive lesson for Steve, the board, and the Apple executives - ASSUMING that no other significant wrongdoing took place. The recent lesson in this arena is to NOT compound things with any obfuscation and cover up efforts. Fess up - come clean - pay your "dues" - learn the lesson - get the focus back on serving the customer and stockholders.

IJ Reilly
Dec 30, 2006, 03:16 PM
The Apple board DID approve it.The official date is whats wrong.

The records refer to the date of a board meeting that did not occur. Apple is not saying any more about this, but I have a feeling the feds are not going to be satisfied with this explanation.

I was saying is that the shareholders arenít going to want him to step down. He might get fed up with them, and whatever they take out of his pocket with a lawsuit, he can demand twice as much the next year, cash.

I think this is why the board is supporting him.

Iím not suggesting how anyone should invest their own money.

Iím just not jumping to conclusions.

The board will stand fully behind him until they don't. That's how it works in the corporate world, and many other places too. If Jobs gets hung by his thumbs by the feds over this, he will leave, and not because the board wants it to happen. They would do it to get out of hot water with the SEC.

Saying, "No way Jobs is going to be asked to step down. Ainít gunna happen" -- THIS is jumping to conclusions.

islanders
Dec 30, 2006, 04:53 PM
Bottom line: I can't afford wishful thinking. I've got too much of my own money at stake.

It sounds like you have something to gain by the stocks going down.

Whatís that called, trading on the short?

Looks like your friends in the know perhaps werenít so knowledgeable after all because the stocks went up on friday.

All Iím asking is to make one statement at a time and back it up, otherwise people might think your not playing with full deck of cards or trying to deal off the bottom.

skunk
Dec 30, 2006, 05:09 PM
It sounds like you have something to gain by the stocks going down.No, anyone holding Apple stock should think really carefully about it..

islanders
Dec 30, 2006, 05:25 PM
No, anyone holding Apple stock should think really carefully about it..



I just said I wasnít suggesting how anyone should invest their money.

I have backed up all my points, Iím not going to start repeating myself here, simply because a few people take parts of statements out of context.

If I donít post back here any time soon that doesnít mean I agree with some of you, nor does it mean I didnít learn something either.

twoodcc
Dec 30, 2006, 06:35 PM
well i hope that this thing is over with, and it doesn't happen again.

skunk
Dec 30, 2006, 07:01 PM
One thing it's not is over.

lu0s3r322
Dec 30, 2006, 07:37 PM
do they really have 84 million lying around from their couple billion dollar profits?

Apple Corps
Dec 30, 2006, 08:01 PM
do they really have 84 million lying around from their couple billion dollar profits?

Lets get with the financial program - from Apple's 12/29/2006 10K filing they have right at $10 BILLION in cash or cash equivalents - so $85 million is - well - you do the math.

Secondly - the issue at hand is a balance sheet problem involving shareholder equity. There is CURRENTLY no cash flow requirement to pay anyone $85 million.

The shareholder lawsuit may change that and, if it does, we might see Fred Anderson and several other execs have to come up with $$$$ they should not have received.

We'll know soon.

AppleIntelRock
Dec 31, 2006, 12:17 AM
Great now we can move on. How about one more thing.... and another.... and another.... and another..... !!!!!!!! :D :D :D :D

jragosta
Dec 31, 2006, 07:31 AM
So the board should have simply wrote him a check instead of backdating options?

Not necessarily. There's nothing illegal about backdating options - if it's done correctly. The board might prefer to pay him with options rather than cash - since the value of the options are dependent on the share price. Options give him an additional incentive to raise the share price, while paying him with cash does not.

Backdating is simply a clumsy way of giving him both current value and future potential.

Spooky, just replace "UnitedHealth" with "Apple Computer", and "McQuire" with "Jobs".

It's the same story - except that Jobs hasn't been forced to resign yet.

Hardly the same story.

First, the story implies that there were financial ties between the committee chairman and the CEO. That's definitely a no-no, especially when the board is not informed.

Second, the CEO profited handsomely, Jobs did not.

Third, the board apparently didn't know anything about the options - unlike the Apple case.

Finally, Apple has made its shareholders a huge amount of money over the past 4 years and the stock options are an insignificant percentage. The relevant facts are not presented for this case.

I can see how your rabid anti-Apple hatred would make you jump on this case, but it's not even close.

AidenShaw
Dec 31, 2006, 12:37 PM
The Mercury News used the Apple logo to illustrate a story on the options scandals...

http://www.mercurynews.com/mld/mercurynews/news/columnists/16356635.htm

AidenShaw
Dec 31, 2006, 12:39 PM
Second, the CEO profited handsomely, Jobs did not.

So, breaking laws and regulations is OK if the stock goes down and you don't make a profit?

IJ Reilly
Dec 31, 2006, 12:46 PM
It sounds like you have something to gain by the stocks going down.

Whatís that called, trading on the short?

Looks like your friends in the know perhaps werenít so knowledgeable after all because the stocks went up on friday.

All Iím asking is to make one statement at a time and back it up, otherwise people might think your not playing with full deck of cards or trying to deal off the bottom.

I'm not sure if I'm following you, but I'm quite certain that you aren't following me. FWIW, I've been a "long" investor in AAPL since 1997. That modest investment nine years ago has turned into quite a chunk of change, a significant part of my investment portfolio. So if something happens to Steve Jobs, I stand to get hurt, big time. I've been there before, having had a front-row seat for every one of Apple's bumps in the road over these years, and having felt them personally in my rear-end. Trust me, there have been far too many.

All of which is more than you deserve to know. The point being, you really ought to pay better attention to what someone is saying, instead of attempting to fabricate ulterior motives for their having said it.

In any event, this the kind of thing people with actual money at stake need to know:

Apple report fails to end stock-option controvesy

CEO Jobs is cleared, but questions remain about his role in backdating grants.

Apple Computer Inc. on Friday cleared Chief Executive Steve Jobs of wrongdoing regarding its improper handling of stock options, but new details from an internal investigation only fueled controversy.

The company revealed that Jobs "was aware or recommended" the selection of favorable dates for stock options awarded to other executives, although he didn't personally profit or "appreciate the accounting implications" of the practice, according to a filing with the Securities and Exchange Commission. Previously, the Cupertino, Calif.-based technology giant said only that Jobs had been aware of the backdating but didn't personally benefit from it.

Apple also disclosed that a special board meeting in which directors were said to have approved an improperly dated option grant to Jobs never took place.

The disclosures could mean that questions regarding the backdating of options at Apple and Jobs' role in it won't go away any time soon, despite the company's effort to put the matter to rest, an industry expert said.

"The company is desperately trying to make us believe that just because [Jobs] wasn't self-dealing directly and because they've come clean and done a thorough investigation, that this is OK," said Christopher Whalen, managing director of Institutional Risk Analytics, a Hawthorne-based financial research firm.

"The problem is that it might not be. We don't know how the SEC or other authorities are going to react to these disclosures."

In the filing, Apple held to its previous claim that the three-month probe by a special board committee had found no wrongdoing by Jobs or other members of its current management.

"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," former Vice President Al Gore, chairman of the committee, and Jerome York, chairman of Apple's audit and finance committee, said in a joint statement.

The current scandal over option backdating has ensnared more than 180 U.S. companies and claimed the jobs of several high-level executives, including Bruce Karatz, then head of Los Angeles home builder KB Home.

Investors have fretted that the issue could potentially unseat Jobs, who is credited with reviving Apple's fortunes with such popular products as the iPod music player.

But Wall Street appeared reassured by the board's strong support for Jobs and the news that correcting the option backdating would require it to reduce its previously reported earnings by $84 million ó a relatively small amount for a company that earned almost $2 billion in its fiscal year that ended Sept. 30.

Apple's stock, which had dropped almost 12% in the last month as concerns about the option issue grew, jumped almost 5% on Friday. Several stock analysts and portfolio managers expressed hope that the company would now be able to put questions behind it.

Options are rights to buy stock at a set price within a certain time period. The price of stock to be bought using an option is generally the stock's market price on the day the option is granted by the company's board.

In their current probes of option practices, regulators are focusing on so-called backdating, whereby option grant dates are changed by weeks or months to coincide with the stock's lowest price in a particular period. Doing so could give the executives instant paper gains on their options. It could also cause a company's financial results to understate compensation costs and overstate earnings.

Backdating isn't necessarily illegal, but failing to disclose the practice in a timely manner is.

In its most detailed account yet of its option practices, Apple said its internal investigation uncovered dating irregularities with 6,428 option awards to various Apple employees on 42 dates between October 1996 and January 2003.

Of two option grants made to Jobs during that period, the company's probe found that an award of options to buy 7.5 million shares was dated Oct. 19, 2001, when the exercise price was $18.30 a share, instead of the correct date of Dec. 18, 2001, when the price was $21.01. The difference could have meant an extra $20 million for Jobs.

That grant, along with one awarded in January 2000 for 10 million shares, was canceled in 2003, when Jobs was given 5 million shares of restricted stock, the company said.

The filing also reported that approval of the 2001 grant to Jobs "was improperly recorded as occurring at a special board meeting on October 19, 2001. Such a special board meeting did not occur."

The filing did not elaborate on the meeting that didn't take place, and an Apple spokesman declined to provide additional details. "Apple's most recent filing creates more questions than it answers," said Christopher Bebel, a former federal prosecutor and SEC counsel. "And many of the assertions serve as a launching pad for 20 Questions.

"It seems clear that the board is trying to whitewash these problems. But in reality, it's wishful thinking. This problem is growing larger with each denial, because the denials are so suspect."

The company's insistence that Jobs was unaware of the accounting ramifications of the backdated option grants given to fellow Apple employees also raised eyebrows.

Apple "has a lot of explaining to do," said former federal prosecutor Jan Handzlik. "This is not a matter of esoteric accounting principles applied to very imaginative and aggressive transactions. This is pretty straightforward."

In its SEC filing, Apple again sought to place responsibility for its option backdating on two departed executives. The company hasn't identified the two, but they are understood to be former Chief Financial Officer Fred Anderson, who resigned from the board four days before Apple announced the results of the internal probe Oct. 4, and former General Counsel Nancy Heinen, who left the company in the spring.

Anderson was not a member of Apple's compensation committee at the time of the 2001 grant to Jobs and "had no knowledge of any impropriety relating to this option grant," Anderson's attorney, Jerome Roth, said in a statement.

Heinen couldn't be reached for comment. She has denied any wrongdoing in the matter.

The U.S. attorney's office in San Francisco, which is conducting a broad probe of option backdating, and the SEC declined to comment on Apple's filing.

At least 11 shareholder lawsuits have been filed against Apple alleging improper option dating. The suits have been consolidated into a single case in federal court in San Jose.

In conducting its inquiry, Apple said, the panel analyzed 42,077 option grants made on 259 dates, examining more than 1 million paper and electronic documents and interviewing more than 40 current and former employees, board members and advisors.

Apple's shares closed Friday at $84.84, up $3.97.

http://www.latimes.com/business/la-fi-apple30dec30,1,5846395.story

islanders
Dec 31, 2006, 01:17 PM
All of which is more than you deserve to know. The point being, you really ought to pay better attention to what someone is saying, instead of attempting to fabricate ulterior motives for their having said it.
url]


If you want to come in here lobbing bomb shells, be prepared to back it up. Which you have failed to do.

I could care less about your investments. Your the one who brought it up because you couldnít support the overzealous prosecution theory.

islanders
Dec 31, 2006, 01:55 PM
Apparently Microsoft backdated stock options as well.

Iím more interested in primary sources as to how this is going to play out.

I appreciate the dooms dayers, but so far there is no reasoning to support this.

Iím not saying someone isnít going to drop the bomb, but so far no one has. Just wild speculation.

Ok the stocks have been fluctuatingÖ thanks for the generous info. (wrong thread anyway)

Anyway here is another link... is this similar?


http://users2.wsj.com/lmda/do/checkL...981081966.html

IJ Reilly
Dec 31, 2006, 03:48 PM
If you want to come in here lobbing bomb shells, be prepared to back it up. Which you have failed to do.

I could care less about your investments. Your the one who brought it up because you couldnít support the overzealous prosecution theory.

Well, it seems that you "could care less" about my investments, because you accused me of "having something to gain" from the stock going down. The only way to respond to this patently ridiculous accusation is to demonstrate how completely wrong it is.

Did you read the article I posted? Are you prepared to comment on it? Have you supplied any evidence for your theories? Any at all?

If you can't answer affirmatively to all of these questions, and if you insist on making personal accusations, then I have to suggest that you back off, before you get yourself in hot water.

AidenShaw
Dec 31, 2006, 04:06 PM
Apparently Microsoft backdated stock options as well.

According to this story, Microsoft's practice was well-known at the time... http://www.mercurynews.com/mld/mercurynews/business/14841898.htm

Many companies have employee stock purchase plans with similar features - but it's above the table and accounted for in the reports. (E.g. it's common for an ESPP to give the employee the better price of the closing price at the beginning and ending of the purchasing period.)

These seldom involving falsifying records of meetings that did not take place, however.

islanders
Dec 31, 2006, 04:15 PM
Who knows? We're in an entirely new environment (post-Enron) where board room misdealing are concerned. The Enron situation itself was obviously different, and far, far more serious -- but the Jobs defense is eerily similar. If Jobs gets caught in a web of "should have known," or even worse, "did know but claims ignorance," then I can see him being forced to step down. We're obviously not there yet, but keep in mind admitting wrongdoing is not the same as being exonerated for wrongdoing. Apple can't give themselves a pass. Only the SEC and the courts can do that.

Well, it seems that you "could care less" about my investments, because you accused me of "having something to gain" from the stock going down. The only way to respond to this patently ridiculous accusation is to demonstrate how completely wrong it is.

Did you read the article I posted? Are you prepared to comment on it? Have you supplied any evidence for your theories? Any at all?

If you can't answer affirmatively to all of these questions, and if you insist on making personal accusations, then I have to suggest that you back off, before you get yourself in hot water.



IJ Reilly said,

“This strains belief, and sounds suspiciously like the Ken Lay defense. It didn't work for Lay, where far more complicated financial dealings were involved, and I would not expect it to work for Jobs.”

I responded,

But what happened to Enron is not the same situation at all with Apple.

You said,

Who knows? We're in an entirely new environment (post-Enron) where board room misdealing are concerned...the Jobs defense is eerily similar. If Jobs gets caught in a web of "should have known," or even worse, "did know but claims ignorance," then I can see him being forced to step down...”

Next,

You said,

“If it can be shown that Jobs knew that the back-dated options (not just his!) should have been reported as expenses in the company's balance sheet, then his goose is almost certainly cooked. The problem is, it should not be hard to demonstrate that he knew, or at least should have known. The effort to blame all of this on two departed execs is probably not going to be enough to save him if the feds decide to pursue this issue.

Unfortunately, I can see plenty of reasons why it could turn far less than fine, and so can quite a number of people who understand these issues. The feds are not going to care two hoots about how important Jobs is to Apple.

Bottom line: I can't afford wishful thinking. I've got too much of my own money at stake.”

(Fine, but where is the source to back this up? And what people understand these issues?)

I said,

“I was saying is that the shareholders aren’t going to want him to step down. He might get fed up with them, and whatever they take out of his pocket with a lawsuit, he can demand twice as much the next year, cash.

I think this is why the board is supporting him.

I’m not suggesting how anyone should invest their own money.”

I’m just not jumping to conclusions.”

You also added,

“True, but Apple being in even worse company does not improve their situation where the law is concerned, and all the mea culpas in the world don't cut much ice with federal prosecutors. They very well might want to make an example of somebody, preferably a prominent somebody, and Apple and Steve Jobs might just be the big fish they're looking for. We just don't know.”


That’s all there was to it. You are lobbing bomb shells but can’t back it up.

Why not respond to the link I posted for Micro Soft back dating stocks?

AidenShaw
Dec 31, 2006, 05:31 PM
Why not respond to the link I posted for Micro Soft back dating stocks?
I responded, and so did he.

Backdating per se (as in, rewarding options at a historical price) is not illegal. Options can be awarded at any desired price - I could be awarded options for a stock at $1, even though the current price is $20.

If you give me options for $1, though, you need to reflect in the books that the real cost is $19.

If Microsoft reflected the options cost accurately, then there was no foul play. (Also note, however, that the rules for accounting for the real costs of options have recently changed. What Microsoft did last century doesn't have to be held up to the post-Enron ruleset.)

I think that the L.A. Times article describes the real issues and risks for Apple quite clearly. Please go to http://www.latimes.com/business/la-fi-apple30dec30,1,5846395.story and read that, and tell us how that analysis contradicts the points that IJ, myself and others have been making.

islanders
Dec 31, 2006, 07:13 PM
I responded, and so did he.

Backdating per se (as in, rewarding options at a historical price) is not illegal. Options can be awarded at any desired price - I could be awarded options for a stock at $1, even though the current price is $20.

If you give me options for $1, though, you need to reflect in the books that the real cost is $19.

If Microsoft reflected the options cost accurately, then there was no foul play. (Also note, however, that the rules for accounting for the real costs of options have recently changed. What Microsoft did last century doesn't have to be held up to the post-Enron ruleset.)

I think that the L.A. Times article describes the real issues and risks for Apple quite clearly. Please go to http://www.latimes.com/business/la-f...,5846395.story and read that, and tell us how that analysis contradicts the points that IJ, myself and others have been making.


That link is down

Otherwise have a good New Years!

jragosta
Dec 31, 2006, 07:40 PM
So, breaking laws and regulations is OK if the stock goes down and you don't make a profit?

Where did I say that?

It's bad enough that you've already lost every argument that you're in. Making things up and pretending that someone else said them is even worse.

AidenShaw
Dec 31, 2006, 08:03 PM
Where did I say that?

Here:

Second, the CEO profited handsomely, Jobs did not.

jragosta
Dec 31, 2006, 09:24 PM
Here:

You must have failed reading comprehension.

I never said it was OK because Jobs didn't profit by it. I said that the situation was different than the case you cited because Jobs didn't profit by it.

Please learn to read.

AidenShaw
Jan 1, 2007, 07:20 AM
I said that the situation was different than the case you cited because Jobs didn't profit by it.
There are other differences as well, which you didn't mention (Apple is an MP3 player maker, the other company is in health care.)

I therefore can only take your comment (that SJ didn't profit) to mean that not making money off the crime is a mitigating factor in Jobs' favor.

Therefore, my question about situational ethics - if it is OK to commit the crimes if you don't profit.

Perhaps you could hone your writing skills, and explain why in your opinion Jobs not making a direct profit makes a difference.

AidenShaw
Jan 1, 2007, 09:55 AM
That link is down

Otherwise have a good New Years!

My error - I copied the "shortened" URI, not the full one.

The correct link is:

http://www.latimes.com/business/la-fi-apple30dec30,1,5846395.story

Apple Corps
Jan 1, 2007, 11:02 AM
Happy New Year to all - the thing that I think we can all agree on is that Apple & Steve stepped into it on this dumb move and now wish that a different course of action had been taken earlier.

Repeating my previous point on this topic - it may be an inexpensive lesson for Steve / Apple / the Board of Directors / et.al. assuming no other wrong doing comes to light.

The group that developed that pathetic press release that "Steve did not...... understand the accounting implications" should all be fired. That is on par with the infamous Clinton "but I did not inhale" comment several years ago. Corporate spin and neither HONEST NOR TRANSPARENT.

Lets hope the courts and SEC drive this to a conclusion rapidly and fairly. We do not need this type of distraction to the Apple focus and performance.

IJ Reilly
Jan 1, 2007, 11:40 AM
That link is down

Otherwise have a good New Years!

You don't need the link. I reprinted the story in full in post #75. Now I know why you refuse to respond to the facts presented in this story -- because you apparently refuse to read it.

IJ Reilly
Jan 1, 2007, 11:58 AM
Happy New Year to all - the thing that I think we can all agree on is that Apple & Steve stepped into it on this dumb move and now wish that a different course of action had been taken earlier.

Repeating my previous point on this topic - it may be an inexpensive lesson for Steve / Apple / the Board of Directors / et.al. assuming no other wrong doing comes to light.

The group that developed that pathetic press release that "Steve did not...... understand the accounting implications" should all be fired. That is on par with the infamous Clinton "but I did not inhale" comment several years ago. Corporate spin and neither HONEST NOR TRANSPARENT.

Lets hope the courts and SEC drive this to a conclusion rapidly and fairly. We do not need this type of distraction to the Apple focus and performance.

Apple's explanation for Steve's role in this affair is sadly more like Ken Lay than Bill Clinton. The ignorance defense is really weak.

Unfortunately, it seems the distraction will continue well into 2007. Even if the SEC quickly decides that the matter is closed (which seems frankly unlikely) then you've got the prospect of the consolidated stockholder class action suit grinding its way through the courts at the usual slow-motion pace. Given Apple's admission that irregularities occurred, the stockholder suits are unlikely to be dismissed by a judge. So the only way they can be resolved quickly is if Apple settles, and I don't suppose the attorneys for the class action suit are going to be very motivated to accept a settlement before the SEC rules on the matter.

islanders
Jan 1, 2007, 12:03 PM
I liked this one from CNN. This seems to be right in line with my assessment.


http://money.cnn.com/2006/12/29/technology/apple_jobs/index.htm?postversion=2006122911


But despite the fact that Jobs' name had surfaced more prominently in the most recent accounts of Apple's options problems, several Wall Street analysts said before the filing Friday that they thought Jobs would be exonerated.

"Any time a CEO is at risk of being, for lack of a better word, forcibly removed, then investors should be concerned. But do I believe that Steve Jobs' job is at risk? That's an unequivocal no," said Jonathan Hoopes, an analyst with ThinkEquity Partners.

Hoopes added that he did not think that there was much in the way of significant new disclosures about Apple in the past few days and blamed the sell-off on the inexperienced traders working the holiday week.

SEC crackdown?

Another analyst wrote in a report Thursday that since the options backdating problems have affected so many companies, it's unlikely that Jobs will get singled out by the SEC for any wrongdoing.

"Our sources estimate that options backdating is a widespread and commonplace problem in the Fortune 500, affecting potentially as many as 30-35 percent of companies. Given the widespread nature, we doubt the SEC and Department of Justice will pursue a broad 'witch hunt' forcing key executives to step down that would undermine the recovery of the U.S. economy," wrote American Technology Research analyst Shaw Wu.

The SEC has not commented as to whether or not it is looking into Apple's options practices.

"Not to sound like conspiracy theorists, but we do not believe it makes sense for the U.S. government to nail AAPL and Steve Jobs, one of the most respected American companies and businessmen of the past 100 years," Wu added.

Apple Corps
Jan 1, 2007, 12:31 PM
My guess is that the "distraction" will die down fairly soon (absent new problems). Like Reilly, I have a significant investment in Apple stock and want to see my company out of the headlines for this type of thing.

Also - as a general comment to all - many of these "analysts" have little, if any, insight beyond what many of us have. They are often quoted - but that does not confer any particular insight as far as I am concerned.

One of the real challenges with the internet is that a position on any topic can be drug up to lend support to a point of view. They can tend to be viewed with equal validity when in fact...........:rolleyes:

islanders
Jan 1, 2007, 12:31 PM
You don't need the link. I reprinted the story in full in post #75. Now I know why you refuse to respond to the facts presented in this story -- because you apparently refuse to read it.



Your the one who brought up your own personal portfolio, not me. You should have simply stated that stocks were likely to go down, then backed this up. (which is still backing off some of your other conspiracy theories) I still can’t understand why anyone would want to disclose their personal finances on the internet. Which is why I questioned some other ulterior motive, for your own decision to drag your personal issues into what is supposed to be an objective discussion.

You claimed that you had a personal vestment, and I only speculated on exactly what you meant by a claim that was completely out of context.

Otherwise I will agree that it was more information than we deserved, so there, be happy, you made one valid point.

Apple Corps
Jan 1, 2007, 12:35 PM
One other observation is that the Compensation Committee of the Board has FAILED miserably in their duties - that group needs to be reconstituted as well.

IJ Reilly
Jan 1, 2007, 12:46 PM
Your the one who brought up your own personal portfolio, not me. You should have simply stated that stocks were likely to go down, then backed this up. (which is still backing off some of your other conspiracy theories) I still can’t understand why anyone would want to disclose their personal finances on the internet. Which is why I questioned some other ulterior motive, for your own decision to drag your personal issues into what is supposed to be an objective discussion.

You claimed that you had a personal vestment, and I only speculated on exactly what you meant by a claim that was completely out of context.

Otherwise I will agree that it was more information than we deserved, so there, be happy, you made one valid point.

I brought up my investments only in response to a personal attack that you should not have made in the context of this or any other "objective discussion."

I have offered up no "conspiracy theories." This is another ridiculous accusation that you continue to make completely in contradiction of the facts. Once again, I will advise you that personal attacks are not permitted in this forum.

cynerjist
Jan 1, 2007, 12:58 PM
like many i certainly made money on this. i placed a limit order for just under 80 bucks per share.

anyway, Jobs DID profit on this, but not illegally. He voluntarily cancelled the options in question in March 2003 in exchange for 5 million shares of restricted stock. After the 2-for-1 split in February 2005, he now holds 10 million in restricted stock. After Friday's close of $85 per share, the $7.45 a share exercise price of Jobs' restricted shares makes them worth $775 million.

IJ Reilly
Jan 1, 2007, 01:07 PM
My guess is that the "distraction" will die down fairly soon (absent new problems). Like Reilly, I have a significant investment in Apple stock and want to see my company out of the headlines for this type of thing.

Also - as a general comment to all - many of these "analysts" have little, if any, insight beyond what many of us have. They are often quoted - but that does not confer any particular insight as far as I am concerned.

One of the real challenges with the internet is that a position on any topic can be drug up to lend support to a point of view. They can tend to be viewed with equal validity when in fact...........:rolleyes:

Ah, but apparently we're not allowed to express our concerns as stockholders, lest we be accused of being "bomb throwers" and "conspiracy theorists." ;)

A few days ago, I'm almost certain it was before Apple released their report, Gene Munster, an analyst who follows Apple very closely said he thought the chances of Jobs being forced out was something on the order of 5% (a paraphrase, I don't recall his exact words). I have no idea how he arrived at that number, and I don't know if he's been on the record since the report was released, but I agree in general that analysts are a dime-a-dozen, and like economists, one can be found to represent virtually any opinion. In my mind, they essentially cancel each other out. This is why I found the quotes from the two former federal prosecutors in the LA Time article so worrying -- these people are far more likely to be on top of the kinds of matters the SEC can be expected to pursue than any given stock market analyst.

Sherman Homan
Jan 1, 2007, 01:15 PM
Gotta disagree a wee little bit. Getting into legal trouble with the SEC for fraud, theft, misleading, whatever, is courting disaster. I don't think that any listed, publicly held company like Apple and Jobs can take that risk.

There are obvious exceptions like Enron, but they were headed over the cliff anyway. They got into legal trouble for their stealing ways as the roof was coming down. Apple is on a market run and I can't believe that those stock options would be worth the damage. Look at what happened to AAPL stock in the days that their legal trouble was announced: from 92 to 82 with 900 million shares outstanding of means a change in market value of 9 billion dollars.

That is a lot of money, even to me...!

AidenShaw
Jan 1, 2007, 01:44 PM
...anyway, Jobs DID profit on this, but not illegally. He voluntarily cancelled the options in question in March 2003 in exchange for 5 million shares of restricted stock. After the 2-for-1 split in February 2005, he now holds 10 million in restricted stock. After Friday's close of $85 per share, the $7.45 a share exercise price of Jobs' restricted shares makes them worth $775 million.
A "grant" is a gift of stock. There is not "exercise price", Jobs was given 10 million shares (after the split).

He's already sold almost half of them...

http://www.appleinsider.com/article.php?id=1621

Apple's Jobs pays $295M in taxes on 10M vested shares

By Kasper Jade

Published: 06:00 PM EST
Apple Computer chief executive Steve Jobs this month used over 4.5M of the 10M restricted shares owed to him by the company to pay income and other employment taxes applicable to those shares, AppleInsider has discovered.

Peace
Jan 1, 2007, 01:50 PM
Happy New Year Aiden!!

What are you going to do if nothing comes of all this ?

AidenShaw
Jan 1, 2007, 01:56 PM
Happy New Year Aiden!!

What are you going to do if nothing comes of all this ?

Where have I said that I expect "something" to come of this?

I think the gist of my arguments has been to point out to some of the rabid fanbois "what could happen" when they've made posts like "Well I'm glad Apple got away with this one with a slap on the wrist.".

In my opinion, I don't think that it's very likely that Jobs will be forced out.

On the other hand, this business of falsifying records is very serious - if it turns out that Jobs knew about that he'll have to fall on the sword.

cynerjist
Jan 1, 2007, 02:15 PM
A "grant" is a gift of stock. There is not "exercise price", Jobs was given 10 million shares (after the split).

He's already sold almost half of them...

http://www.appleinsider.com/article.php?id=1621

Apple's Jobs pays $295M in taxes on 10M vested shares

By Kasper Jade

Published: 06:00 PM EST
Apple Computer chief executive Steve Jobs this month used over 4.5M of the 10M restricted shares owed to him by the company to pay income and other employment taxes applicable to those shares, AppleInsider has discovered.

you (or appleinsider) are mistaken. i don't feel like volleying posts with you, but...

he was given 5 million in 2003 (before the split), that became 10 million in 2005 (after the split). exercising an option and the exercise price associated with restricted shares are two totally DIFFERENT concepts. He was awarded the restricted stock for a post-split equivalent of $7.45 per share.

see this link...
http://www.newsalert.com/news/story/apple-says-ceo-jobs-recommended/story.aspx?guid=%7BCC340653-D475-4C07-BE2B-F2620628A70F%7D&dist=TNMKTW

IJ Reilly
Jan 1, 2007, 02:28 PM
On the other hand, this business of falsifying records is very serious - if it turns out that Jobs knew about that he'll have to fall on the sword.

Exactly. As I've said already, we can't claim to know the full story, because Apple hasn't really related the full story, most importantly the details of a crucial board meeting that apparently did not actually occur. Neither can any of us claim to know whether the SEC will pursue the matter any further. We only know that if they do, Apple, by its own investigation, has loaded of couple of bullets in the SEC's gun. We can only hold our breath and wait. In the meantime, this AAPL investor's knuckles are going to be even a little whiter than usual.

Peace
Jan 1, 2007, 03:07 PM
Exactly. As I've said already, we can't claim to know the full story, because Apple hasn't really related the full story, most importantly the details of a crucial board meeting that apparently did not actually occur. Neither can any of us claim to know whether the SEC will pursue the matter any further. We only know that if they do, Apple, by its own investigation, has loaded of couple of bullets in the SEC's gun. We can only hold our breath and wait. In the meantime, this AAPL investor's knuckles are going to be even a little whiter than usual.

You are mis-quoting here.

The board meeting that "apparently did not actually occur" actually DID occur.The DATE of the board meeting is what's different.

Please stick with the facts.

AidenShaw
Jan 1, 2007, 03:46 PM
The board meeting that "apparently did not actually occur" actually DID occur.The DATE of the board meeting is what's different.

Please stick with the facts.

Picky, picky, picky.

The board meeting on date X did not occur - that fact is not contested.

A board meeting on another date did occur. Not contested.

Documents were falsified, lies were committed, perhaps even crimes were made.

But, please, the liars here are the Apple execs, not the MacRumors participants....

IJ Reilly
Jan 1, 2007, 03:55 PM
You are mis-quoting here.

The board meeting that "apparently did not actually occur" actually DID occur.The DATE of the board meeting is what's different.

Please stick with the facts.

No, I am direct-quoting here, from the LA Times article:

Apple also disclosed that a special board meeting in which directors were said to have approved an improperly dated option grant to Jobs never took place.

The filing did not elaborate on the meeting that didn't take place, and an Apple spokesman declined to provide additional details. "Apple's most recent filing creates more questions than it answers," said Christopher Bebel, a former federal prosecutor and SEC counsel. "And many of the assertions serve as a launching pad for 20 Questions.

I can cite any number of other articles which say exactly the same thing, because they quote directly from Apple's statement. So yes, please let's stick to the facts.

Peace
Jan 1, 2007, 04:03 PM
You should read Apple's disclosure in it's entirety instead of blurbs from newspapers.

Get back to me when you've read it.:)

IJ Reilly
Jan 1, 2007, 04:12 PM
You should read Apple's disclosure in it's entirety instead of blurbs from newspapers.

Get back to me when you've read it.:)

I don't have to get back to you when I've read it, because I already have. From Apple's 10-K filing:

The grant dated October 19, 2001 was originally approved at a Board meeting on August 29, 2001, with an exercise price of $17.83. The terms of the grant, however, were not finalized until December 18, 2001. The grant was dated October 19, 2001, with an exercise price of $18.30. The approval for the grant was improperly recorded as occurring at a special Board meeting on October 19, 2001. Such a special Board meeting did not occur. There was no evidence, however, that any current member of management was aware of this irregularity. The Company has recognized $20 million in stock?based compensation expense for this grant, reflecting the difference between the exercise price of $18.30 and the share price on December 18, 2001 of $21.01.

islanders
Jan 1, 2007, 04:25 PM
I brought up my investments only in response to a personal attack that you should not have made in the context of this or any other "objective discussion."

I have offered up no "conspiracy theories." This is another ridiculous accusation that you continue to make completely in contradiction of the facts. Once again, I will advise you that personal attacks are not permitted in this forum.

These are some of the theories you have tried to make,

1) The Enron Theory,

“This strains belief, and sounds suspiciously like the Ken Lay defense. It didn't work for Lay, where far more complicated financial dealings were involved, and I would not expect it to work for Jobs.”

2) The overzealous prosecution theory,

“They very well might want to make an example of somebody, preferably a prominent somebody, and Apple and Steve Jobs might just be the big fish they're looking for. We just don't know.”

3) Or the United Health theory,

“Or like this:

http://www.californiahealthline.org/...angedID=125882

Sound at all familiar?”

Aiden Shaw sure thinks so,

“Spooky, just replace "UnitedHealth" with "Apple Computer", and "McQuire" with "Jobs".

It's the same story - except that Jobs hasn't been forced to resign yet.”


4) The “His Goose is Cooked” Theory,

“Personal profit isn't the main issue. Correct financial reporting is. If it can be shown that Jobs knew that the back-dated options (not just his!) should have been reported as expenses in the company's balance sheet, then his goose is almost certainly cooked. The problem is, it should not be hard to demonstrate that he knew, or at least should have known. The effort to blame all of this on two departed execs is probably not going to be enough to save him if the feds decide to pursue this issue.”

5) Back to the overzealous prosecution theory,

The feds are not going to care two hoots about how important Jobs is to Apple.





6) The “I’m going broke theory.”

Bottom line: I can't afford wishful thinking. I've got too much of my own money at stake.

7) The “Hung by his Thumb Nails Theory”

“If Jobs gets hung by his thumbs by the feds over this, he will leave, and not because the board wants it to happen.”

8) The personal attack theory,

“All of which is more than you deserve to know.”

(Um why did you tell me your personal issues, if it’s more than I deserved to know?)

Like I said, I’m not a psycriatrest, so I can’t help you on that one. But you seem to get order of the post mixed up.

I’ll call that one the “Innocecnt Victom Theory.”

“Ah, but apparently we're not allowed to express our concerns as stockholders, lest we be accused of being "bomb throwers" and "conspiracy theorists."


Conclution: I’msorry but that seems lot of spin to me.

IJ Reilly
Jan 1, 2007, 05:27 PM
This is becoming surreal. A couple of days ago, you joined this thread saying you knew nothing at all about stock options. So a few of us, myself included, patiently explained the issues. Now, just a few days later, you are an expert; in fact, you're beyond expertise -- you've apparently become an authority, someone who not only doesn't need to listen, but who can confidently tell others what they really meant to say. That's quite a transformation.

WildPalms
Jan 1, 2007, 06:03 PM
Man..MacWorld 2007 can't come soon enough..

Apple restates earnings that reflect a $84 million write-off while other silicon valley companies are doing $600 million write-offs and folks here call Gore and Jobs crooks..

You people should be ashamed of yourselves..

And I might add that $84 million is chump change compared to the BILLIONS Microsoft has paid out in fines etc.

And Aiden.




The company also reported today, as it had previously, that Jobs never exercised his own options. Along with an earlier set of 10 million options, the 7.5 million options from 2001 were cancelled in March 2003, when Jobs was instead given 5 million shares of restricted stock, the company said.

So canceling 17.5 million shares and getting 5 million instead is what Aiden?

Sure isn't $850 million..

Very well said Peace :D
Its sad that some other members in this forum will make statements simply to stir up some drama for their own amusement, incorrect as it usually is.

AidenShaw
Jan 1, 2007, 08:47 PM
Very well said Peace :D
Its sad that some other members in this forum will make statements simply to stir up some drama for their own amusement, incorrect as it usually is.

Our "drama" is pretty obvious:

- Not cashing in illegally granted shares does not erase the crime

- 10 million shares at $85 per is in fact fairly close to $850 million (although Jobs has already cashed in 4.5 million shares)

- The fact that the $84M restatement is no more than a rounding error in Apple's bank balance doesn't make the crime less important


I feel sorry that several here can't allow themselves to consider the fact that Apple has committed a crime in this matter. We can discuss opinions on whether it is possible that Jobs will have to resign, but Apple itself admits the crime in its filing.


(I realize that there is a difference between "civil" and "criminal" malfeasance, and I'm not sure whether Apple's wrongdoings are in fact criminal.... But, since I'm only interested in the drama, I'll use the word "crime" ;) )

cynerjist
Jan 1, 2007, 10:11 PM
Our "drama" is pretty obvious:

- Not cashing in illegally granted shares does not erase the crime

- 10 million shares at $85 per is in fact fairly close to $850 million (although Jobs has already cashed in 4.5 million shares)

- The fact that the $84M restatement is no more than a rounding error in Apple's bank balance doesn't make the crime less important


I feel sorry that several here can't allow themselves to consider the fact that Apple has committed a crime in this matter. We can discuss opinions on whether it is possible that Jobs will have to resign, but Apple itself admits the crime in its filing.


(I realize that there is a difference between "civil" and "criminal" malfeasance, and I'm not sure whether Apple's wrongdoings are in fact criminal.... But, since I'm only interested in the drama, I'll use the word "crime" ;) )

my take:

here, i agree with you, it is dirty. the fake board meeting happened because Jobs had a boatload (millions) of stock options that were worthless since the stock price had dropped. As we know an option at $45 is not very useful when the stock is trading at $18. So they faked a meeting and backdated 7.5 million options to give him something of value. (The guy was making $1/yr for a salary, all other compensation had been awarded in these worthless options. They felt bad for him. He had nothing to show for his hard work.) But he came up with a plan and surrendered all of his options (the worthless ones & the 7.5 million in question) for the restricted stock which DID become extraordinarily valuable.

Let me restate what occurred. He cashed in worthless options and dishonestly backdated options for what became 10 million shares of reserve stock at a $7.45 share exercise price. This totals $74.5 million on the books for Apple. But when the stock vested in March, Apple was trading at approx. $66. Thus, the end sum was that Jobs traded worthless options & the questionable backdated options for what ended up being valued at ($66-$7.45)*10 million shares. So what ended up being $74.5 million on the books for Apple ended up being in $600 million (as of March '06, much more now & before taxes) range in Jobs's pocket. Brilliant.

The media frenzy and the restatement only consider the 7.5 million options that were eventually cancelled, not the huge sum of money Jobs pocketed. The bottom line is that the guy got crazy rich on this. But at the same time, he did a hell of a job for a $1 a year salary and some worthless options. He did deserve some compensation, and I say he got it. Is it illegal? No. Does the whole thing smell funny? Sure. Will anything further come of this? No. Jobs is safe.

AidenShaw
Jan 1, 2007, 11:23 PM
the fake board meeting happened because Jobs had a boatload (millions) of stock options that were worthless since the stock price had dropped.
Actually, this is incorrect.

The "board meeting" that never occurred was where Jobs was awarded the 7.5M shares (at a back-dated price) that became underwater.

The meetings where these options (and 20M others) were exchanged for a restricted grant are not under suspicion.


He cashed in worthless options and dishonestly backdated options for what became 10 million shares of reserve stock at a $7.45 share exercise price. This totals $74.5 million on the books for Apple. But when the stock vested in March, Apple was trading at approx. $66.
I'm confused on this - some of the reports say that the 10 million (split-adjusted) shares were a grant, others say that they were options with an exercise price.

I believe the former - that the grant was free and clear, when they vested after three years, Jobs owned the stock without having to pay $7.45 per share.

(I believe that the stories about the tax charge supports this. If you have options, any profit is claimed when the options are exercised. With a grant, when they vest you own the stock, and any capital gains are taxed. You don't have to exercise options when they vest, but a grant is automatic. Since Jobs sold 4.5M shares to pay the tax bill exactly three years later - I don't believe that these were options with an exercise price.)


Is it illegal? No. Does the whole thing smell funny? Sure.
There's nothing illegal about giving options at whatever price. As long as the "cost" of the options is recorded in the company's books correctly, it's legal.

The illegality here is that the books were cooked so that the "cost" of the options was recorded at a date other than the true date. An even more important crime is that records were falsified to make it appear that the options were granted at a meeting, when in fact no such meeting ever occurred.

The $84M restatement reflects these criminal acts - by claiming incorrect dates for options grants, Apple inflated their profits by this amount. The $84M charge corrects the books for these acts. It does not erase the crime of back-dating the options, nor the crime of falsifying the records about the board meeting.


Will anything further come of this? No. Jobs is safe.
Unclear.

The idea that "Nobody is above the law" has taken down presidents of the US, with consequences far greater than replacing the CEO of a medium-large company. (Apple is 159 on the Fortune 500, UnitedHealth is #37 - and earlier posts described how their CEO was forced out over options irregularities.)

The Feds could decide that it is important to nail Jobs to reinforce the idea that "nobody is above the law" also applies to CEOs, no matter what. The L.A. Times article focuses on this aspect of Apple's crime.

Will it really hurt the US economy if Jobs is given a striped suit to wear? No. People with investments in AAPL will be hurt, but that was a risk they took when they invested in the company - they made the mistake of believing that Jobs & crew were honest, and they'll pay for that mistake. Overall, a little blip on the economic radar if Apple's stock drops by 50% - or if a Jobs-less Apple loses its way and withers.

IJ Reilly
Jan 2, 2007, 12:04 AM
Well, I don't think there's any appreciable chance that Steve Jobs, or anybody else for that matter, will "do time" for this. But I think it's likely that the SEC will want to make an example out of somebody at some company, to drive home the point that messing around with the books of a public company to feather the nests of the execs and board members is unacceptable. Other companies have apparently been far more egregious in their flaunting of the reporting rules, at least in terms of the dollar amounts involved, so one would hope they'd score higher than Apple on the SEC's hit parade. The problem is, we just don't know what the SEC is thinking, and we're probably not going to know for a few more months, at least.

Mac'Mo
Jan 2, 2007, 09:14 AM
i still love apple even if its scandalous

cynerjist
Jan 2, 2007, 09:26 AM
aiden, you are having a really difficult time reading/understanding my posts. let me clear it up for you.


Actually, this is incorrect.

The "board meeting" that never occurred was where Jobs was awarded the 7.5M shares (at a back-dated price) that became underwater.

The meetings where these options (and 20M others) were exchanged for a restricted grant are not under suspicion.


okay. the fake board meeting is where he was awarded 7.5 million in backdated options. But it happened BECAUSE all he had were the worthless options he had been previously granted. what you said in response bears no relevance to my post.


I'm confused on this - some of the reports say that the 10 million (split-adjusted) shares were a grant, others say that they were options with an exercise price.

I believe the former - that the grant was free and clear, when they vested after three years, Jobs owned the stock without having to pay $7.45 per share.

(I believe that the stories about the tax charge supports this. If you have options, any profit is claimed when the options are exercised. With a grant, when they vest you own the stock, and any capital gains are taxed. You don't have to exercise options when they vest, but a grant is automatic. Since Jobs sold 4.5M shares to pay the tax bill exactly three years later - I don't believe that these were options with an exercise price.)


the $7.45 exercise price is not an option price. when apple grants restricted stock it is not just "free." they have to assign a value to the shares they are giving away. otherwise it would "cost" the same ($0) to grant one share as it would to grant 5 million shares. the $7.45x10million=$74.5 million is what goes on Apple's books for accounting purposes. Jobs did not pay anything for the stock. The importance of the $7.45 is that is a basis to subtract from the current share price. By subtracting it, you see exactly what Apple gave to Jobs when they awarded him the restricted stock. Otherwise, this restricted stock and most importantly the current share value associated with it would still be theirs, not his. if you aren't following this, i give up...


There's nothing illegal about giving options at whatever price. As long as the "cost" of the options is recorded in the company's books correctly, it's legal.

The illegality here is that the books were cooked so that the "cost" of the options was recorded at a date other than the true date. An even more important crime is that records were falsified to make it appear that the options were granted at a meeting, when in fact no such meeting ever occurred.

The $84M restatement reflects these criminal acts - by claiming incorrect dates for options grants, Apple inflated their profits by this amount. The $84M charge corrects the books for these acts. It does not erase the crime of back-dating the options, nor the crime of falsifying the records about the board meeting.


what i am refering to as not being illegal is the fact that they accepted the worthless options and the options under suspicion for the 10 million shares of restricted stock. the backdated options did have value. but in the end, the deal Jobs struck was the equivalent of me showing up to your house and buying it for $5 and a pencil with no lead. It is not illegal to make a bad deal (even purposely). backdating options and faking a board meeting are certainly unethical moves. however, from the little i know of corporate law, the unethical rarely equates to illegal. you can be fined for unethical behavior, but they are rarely prosecuted. believe it or not, there are not as many real laws regulating accounting and business as you might think or hope. have any legal charges been filed in this case? hmmm. no.

Steve Jobs is not safe because he did nothing wrong. He is safe because they cannot prove he did anything wrong. We can argue all day about who knew what and when, but the premise that governs our legal system remains.

Aiden, please, before you respond with your misinterpretation of yet another post in this thread, please read it again and then again.

devman
Jan 2, 2007, 09:33 AM
You say

I feel sorry that several here can't allow themselves to consider the fact that Apple has committed a crime in this matter.

Then you say

(I realize that there is a difference between "civil" and "criminal" malfeasance, and I'm not sure whether Apple's wrongdoings are in fact criminal....

And then you say

But, since I'm only interested in the drama, I'll use the word "crime"

Whoah dude. You're in a loop and your head just disappeared up your...

(p.s. bias duly noted)

FYI. http://www.cfo.com/article.cfm/7239155/c_7932402

I feel sorry that...

No you don't. You enjoy what you do here.

AidenShaw
Jan 2, 2007, 09:59 AM
FYI. http://www.cfo.com/article.cfm/7239155/c_7932402
Thank you for the link, it's good background for this discussion...

http://www.cfo.com/article.cfm/7239155/c_7932402

When Is Backdating a Crime?

There is no statute that explicitly outlaws backdating stock-option grants, but it seems virtually impossible to backdate options and achieve the ultimate goal of putting grants "in the money" without first deliberately falsifying documents and then covering up the sham.

AidenShaw
Jan 2, 2007, 10:10 AM
aiden, you are having a really difficult time reading/understanding my posts. let me clear it up for you.
Thanks. Yes, I did misread what you were saying.

Also, thanks for clearing up what "exercise price" meant.


Steve Jobs is not safe because he did nothing wrong. He is safe because they cannot prove he did anything wrong.
Unless somewhere there's an email message....

IJ Reilly
Jan 2, 2007, 10:59 AM
okay. the fake board meeting is where he was awarded 7.5 million in backdated options. But it happened BECAUSE all he had were the worthless options he had been previously granted. what you said in response bears no relevance to my post.

I am almost 100% certain that you are incorrect. The phantom board meeting controversy involves the same back-dated options which later were turned in for a grant of restricted stock. Not that it really matters.

Steve Jobs is not safe because he did nothing wrong. He is safe because they cannot prove he did anything wrong. We can argue all day about who knew what and when, but the premise that governs our legal system remains.

This I believe represents a fundamental misunderstanding of Jobs' vulnerabilities. A CEO is supposed to know what is going on in his company. Ignorance is a very weak defense, especially in this case. If the SEC decides to pursue this matter, the crux of the critique insofar as Jobs is concerned is that the plea that he didn't understand the "financial implications" of back-dating is quite implausible. Jobs is vulnerable because he was in charge when the misdeeds went down. It's as simple as that.

cynerjist
Jan 2, 2007, 02:41 PM
I am almost 100% certain that you are incorrect. The phantom board meeting controversy involves the same back-dated options which later were turned in for a grant of restricted stock. Not that it really matters.


this exactly what i am saying. please re-read my posts.


This I believe represents a fundamental misunderstanding of Jobs' vulnerabilities. A CEO is supposed to know what is going on in his company. Ignorance is a very weak defense, especially in this case. If the SEC decides to pursue this matter, the crux of the critique insofar as Jobs is concerned is that the plea that he didn't understand the "financial implications" of back-dating is quite implausible. Jobs is vulnerable because he was in charge when the misdeeds went down. It's as simple as that.

i agree with what you are saying in spirit and principle. but he isn't stepping down and there does not appear to be any available evidence pointing to Jobs' direct involvement or knowledge, which is why i say he is safe from harm. i agree with your second to last sentence, but the misdeeds would need to be much bigger, in my humble opinion, for him to be pressured out.

IJ Reilly
Jan 2, 2007, 03:04 PM
this exactly what i am saying. please re-read my posts.

I'm not totally certain, but I don't think we are saying exactly the same thing. The faked board meeting wasn't claimed because the options had gone under water. It was faked because the price was lower on that day in October then it was on the date when the grant was actually finalized in December. The options still went under water, and were cancelled in favor of an outright grant, but that was later. But again, not that it much matters...

i agree with what you are saying in spirit and principle. but he isn't stepping down and there does not appear to be any available evidence pointing to Jobs' direct involvement or knowledge, which is why i say he is safe from harm. i agree with your second to last sentence, but the misdeeds would need to be much bigger, in my humble opinion, for him to be pressured out.

Of course he's not stepping down -- the board exonerated him. But as I've pointed out before, Apple exonerating their own is not likely to cut much ice with the SEC. As for what they are thinking, we just don't know, and probably won't know for months. I hope Apple uses that time to demonstrate to investors that Apple has broader and deeper leadership than just the one person, so we don't have to get the flu every time Steve catches a cold.

cynerjist
Jan 2, 2007, 03:51 PM
I'm not totally certain, but I don't think we are saying exactly the same thing. The faked board meeting wasn't claimed because the options had gone under water. It was faked because the price was lower on that day in October then it was on the date when the grant was actually finalized in December. The options still went under water, and were cancelled in favor of an outright grant, but that was later. But again, not that it much matters...


we are saying the same thing. maybe you missed my previous posts in this thread. we agree that the purpose of the fake meeting was to backdate the options. but the point i made is that the only reason they granted him the 7.5 million more options, in the first place, was because the 10 million options he already had (and traded in along with these in question for the restricted stock) were not worth anything because the stock had dropped 80%.

The 10 million options were worth nothing. he makes $1 per year. They had to give him something. Hence, the 7.5 million more (backdated) options that might be worth something some day. My point is why they gave him more options period. And yes they were traded in, along with the worthless options, for the restricted stock.

and this does matter. he gave them almost nothing in return for the restricted stock that vested at around $660 million in March. maybe you didn't see my other post.

IJ Reilly
Jan 2, 2007, 05:44 PM
we are saying the same thing. maybe you missed my previous posts in this thread. we agree that the purpose of the fake meeting was to backdate the options. but the point i made is that the only reason they granted him the 7.5 million more options, in the first place, was because the 10 million options he already had (and traded in along with these in question for the restricted stock) were not worth anything because the stock had dropped 80%.

The 10 million options were worth nothing. he makes $1 per year. They had to give him something. Hence, the 7.5 million more (backdated) options that might be worth something some day. My point is why they gave him more options period. And yes they were traded in, along with the worthless options, for the restricted stock.

and this does matter. he gave them almost nothing in return for the restricted stock that vested at around $660 million in March. maybe you didn't see my other post.

Yes, I see. Lots of posts in this thread -- difficult to keep track of everything everyone has said. As for it mattering, I think this is a point where we will just have to disagree for the time being, at least until the SEC rules.

devman
Jan 4, 2007, 12:13 AM
Thank you for the link, it's good background for this discussion...

You're welcome.

dextertangocci
Jan 4, 2007, 06:41 AM
I have no idea what that all means!:confused: :(

AidenShaw
Jan 4, 2007, 10:04 AM
http://www.eweek.com/article2/0,1895,2078503,00.asp

Can Apple Thrive Without Steve Jobs?
By David Morgenstern
January 3, 2007

Opinion: Apple is defending CEO Steve Jobs as the company is under investigation by the feds. To some, he is Apple. But could the company make do without its very public leader?
...

AidenShaw
Jan 4, 2007, 10:06 AM
Today's Page 1 headline in the Mercury News...

http://www.mercurynews.com/mld/mercurynews/16380949.htm

STOCK OPTIONS SCANDAL

Suit turns up heat on Apple

SHAREHOLDER ACTION CITES SUSPICIOUS GRANT DATES AT APPLE AND PIXAR

By Scott Duke Harris
Mercury News

A civil lawsuit containing new assertions about Apple Computer's stock options practices is putting the fabled company and Chief Executive Steve Jobs under more intense scrutiny.

The lawsuit claims that Apple improperly made grants to three senior executives in August 1997, a day before the company announced a major investment from Microsoft that boosted Apple's stock.

Additionally, it says Jobs netted $300 million in profit by selling Apple shares on March 19, ``just one day'' after the Wall Street Journal reported widespread backdating on options in corporate America.

The suit also says Apple's options irregularities coincided with suspicious grants at Pixar, the animation studio where Jobs was the biggest shareholder and which Disney acquired last year.

...

``This is no longer a case in which the defense says, `We didn't understand the accounting implications.' It's now a coverup case, and the backdating was more widespread than we initially thought,'' said Mark Molumphy, an attorney with the Burlingame firm Cotchett Pitre Simon & McCarthy, the lead counsel on the Dec. 18 lawsuit.
...

AidenShaw
Jan 4, 2007, 04:46 PM
http://money.cnn.com/blogs/legalpad/2007/01/apple-iwash-steve-jobss-premature.html

http://i.cnn.net/money/.element/img/1.0/sections/blogs/legal/legal_pad_banner.gif


Tuesday, January 02, 2007

The Apple iWash: Steve Jobs's premature exoneration

Apple's SEC filing last Friday disclosing the outcome of its internal probe into options backdating is masterfully, tantalizingly opaque. Though entitled "explanatory note," the 20-paragraph document contains precious little explanation. It recounts that certain events did, indeed, occur at Apple, but sheds almost no light on how or why.

Investors greeted the announcement with glee--Apple's stock rose 4.9%--but I can't imagine why.
....


CNN also has a story about the shareholder lawsuit:

http://money.cnn.com/2007/01/03/technology/apple_lawsuit/index.htm

skunk
Jan 4, 2007, 05:49 PM
Well, I've had enough of this. I've just ditched all my AAPL stock. Greedy ****ers. :mad:

Edit: Ooops! :o

Apple Corps
Jan 4, 2007, 06:16 PM
Today Jim Cramer mentioned that this entire issue amounts to about 1 cent on earnings per share - insignificant. I continue to hold my Apple stock position with fingers crossed. Cramer (mad money) rated Apple as his #2 pick for 2007 growth stock.

$85.66 close today - up $1.86. Apple stock has had resistance beyond around $90.00 - current projections are all positive - $110, five star, product pipeline, vertical integration on music - video on the way. Some run up is expected with MWSF next week.

cynerjist
Jan 4, 2007, 07:26 PM
Today Jim Cramer mentioned that this entire issue amounts to about 1 cent on earnings per share - insignificant. I continue to hold my Apple stock position with fingers crossed. Cramer (mad money) rated Apple as his #2 pick for 2007 growth stock.

$85.66 close today - up $1.86. Apple stock has had resistance beyond around $90.00 - current projections are all positive - $110, five star, product pipeline, vertical integration on music - video on the way. Some run up is expected with MWSF next week.

couldn't agree more. buy aapl if you need a growth stock. and if you were thinking of selling, don't dare do it until after mwsf where the analyst reports will be hyping the stock after something cool drops.

IJ Reilly
Jan 4, 2007, 07:31 PM
Well, I've had enough of this. I've just ditched all my AAPL stock. Greedy ****ers. :mad:

Busted. ;)

Truly, as a stockholder I expect them to be greedy -- on our behalf. But one thing we can count upon is that board members and execs at large corporations are looking after themselves first and foremost, and us later on, if they think of it, which they usually don't. For the first time in many years now, I'm strongly considering selling into strength. The drip, drip, drip is driving me nuts.

IJ Reilly
Jan 4, 2007, 07:38 PM
couldn't agree more. buy aapl. and if you were thinking of selling, don't dare do it until after mwsf where the analyst reports will be bumping up the stock after something cool drops.

This is by no means the typical pattern. More often than not, AAPL goes down during and after MWSF. Take it from somebody who's been with this stock for a long, long time: MWSF will probably not make you a happy AAPL stockholder. If this is the kind of ride you're seeking, invest in something else.

AidenShaw
Jan 4, 2007, 08:35 PM
This is by no means the typical pattern. More often than not, AAPL goes down during and after MWSF.
It's the "hype factor".

There are so many hyped up rumours that turn out to be false, that the Street ends up being disappointed.

That, and the Street (and many of us) is(are) sometimes clueless about the real significance of tech events.

For example:

The Cube: huge buzz at first, now generally considered a failure
The Ipod: "meh" at first, now most people don't realize that the "Ipod company also makes computers"

AidenShaw
Jan 4, 2007, 09:52 PM
http://yahoo.businessweek.com/technology/content/jan2007/tc20070104_659422.htm

Is Steve Jobs Untouchable?

An internal inquiry gives him a pass in Apple's backdating scandalóbut raises questions about whether he's getting special treatment
by Peter Burrows

In Silicon Valley, Steve Jobs is admired for many things: his storybook resuscitation of Apple Computer (AAPL), his billion-dollar-plus fortune, his rock star status as the driving force behind iconic products such as the iPod. Near the top of the list is Jobsís famed ability to spin what admiring techies refer to as a "reality distortion field" to win consumers over to the Apple view of the world.

But will it work with government regulators? As Jobs prepares to wow the masses once again with his keynote at the annual Macworld trade show on Jan. 9, skepticism abounds among options experts, as well as techies, that the Apple chief executive is totally in the clear over his role in resetting start dates for company stock options.

IJ Reilly
Jan 5, 2007, 12:21 AM
It's the "hype factor".

There are so many hyped up rumours that turn out to be false, that the Street ends up being disappointed.

That, and the Street (and many of us) is(are) sometimes clueless about the real significance of tech events.

For example:

The Cube: huge buzz at first, now generally considered a failure
The Ipod: "meh" at first, now most people don't realize that the "Ipod company also makes computers"

In part, yes -- but I've seen many instance of Apple announcing the very products they were expected to announce, and even products they nobody expected, and watching the stock fall significantly on keynote day. Even in 2006, when the stock took a big jump up during MWSF week, for no particular reason I could see, it had turned down very substantially by the end of January. Both of these moves came long before anybody knew whether the products announced that month would actually sell.

I blame this partly on Apple, for making the markets breathe rumor fumes. Apple might release a mobile phone -- AAPL up 10 percent! Apple might not release a mobile phone -- AAPL down 10 percent! All this before anybody knows what the product will be, or even if there will be a product, let alone whether it will sell. It'll be interesting to see how the markets react to the iTV, given that Apple has already said it's coming. If that product doesn't make its debut next week, with a ship-date within weeks, then watch out below!

AidenShaw
Jan 5, 2007, 09:28 AM
Another Page 1 story in the Mercury News today.

http://www.mercurynews.com/mld/mercurynews/business/16389487.htm

Apple is giving Jobs a free pass, critics say

`TRYING TO PRESERVE COMPANY'S NO. 1 ASSET'

By Mark Schwanhausser and Troy Wolverton


While Apple Computer's board last week gave Chief Executive Steve Jobs a vote of ``complete confidence'' in an investigation of manipulated stock options, critics are questioning whether the company's directors are letting Jobs off too easily because of his value to the company.

``I think Apple's board has tried to preserve the company's No. 1 asset: Steve Jobs,'' said James Post, a Boston University management professor who specializes in corporate governance. ``But there is a lot of evidence that he knew about -- and approved -- the backdating practices and related accounting issues.''

The Cupertino computer giant disclosed last Friday that its investigation concluded that Jobs not only had received tainted grants but also recommended ``favorable'' grant dates to Apple executives. Previously, the company had said Jobs had only been ``aware'' of the abuses.

``Apple's board deserves an `F' for how it has handled its backdating investigation,'' said Lynn Turner, managing director of research at Glass Lewis, a firm that advises investors on corporate governance and accounting issues.
...

cynerjist
Jan 5, 2007, 06:08 PM
MWSF will probably not make you a happy AAPL stockholder. If this is the kind of ride you're seeking, invest in something else.

you seem pretty negative about apple stock. i think you just like arguing.

we can only wait and see. :-)

IJ Reilly
Jan 6, 2007, 12:28 AM
you seem pretty negative about apple stock. i think you just like arguing.

we can only wait and see. :-)

No, just experienced, and I don't mind sharing.

devman
Jan 6, 2007, 11:09 AM
Here's a much more interesting read on this. Not the usual sensationalist or agenda crap. http://www.law.com/jsp/ca/PubArticleCA.jsp?id=1167991338429

IJ Reilly
Jan 6, 2007, 07:15 PM
Here's a much more interesting read on this. Not the usual sensationalist or agenda crap. http://www.law.com/jsp/ca/PubArticleCA.jsp?id=1167991338429

That is an interesting article, but essentially little more than a restatement of what we already knew, with the addition of new character to the cast.

AidenShaw
Jan 7, 2007, 06:44 AM
http://www.law.com/jsp/article.jsp?id=1167991339566

Apple Quietly Canned Lawyer Who Backdated

Justin Scheck
The Recorder
January 8, 2007


Steve Jobs is an ideas guy. He wears jeans, grows beards and orates to cheering throngs at events like this week's MacWorld conference.

Jobs' biographers say evidence indicates that he's a pescetarian. He went to India. He takes only $1 a year in salary. And he leaves it up to other people to award him hugely valuable piles of stock in Apple Computer, where he's the CEO.

People like Wendy Howell, the former in-house Apple lawyer responsible for option paperwork, probably won't be attending Jobs' eagerly awaited MacWorld speech Tuesday. Late last year, she became the lone person to lose her job as a result of the company's well-publicized options problems.

Howell's name hasn't been publicly mentioned in the Apple options mess, and her firing wasn't disclosed by the company in its series of public disclosures of options problems.

But she was the person who filled out the paperwork on a 2001 option award to Jobs that has grown infamous since just after Christmas, when Apple acknowledged that the value of the grant was artificially pumped up via a set of fabricated meeting minutes.

devman
Jan 7, 2007, 07:24 AM
aiden, dude, slow down, you're getting too excited. I posted the same article a few posts above.

http://forums.macrumors.com/showthread.php?p=3212438#post3212438

AidenShaw
Jan 7, 2007, 02:39 PM
aiden, dude, slow down, you're getting too excited. I posted the same article a few posts above.

http://forums.macrumors.com/showthread.php?p=3212438#post3212438


You posted article #1167991338429, I posted #1167991339566. ;)

AidenShaw
Jan 7, 2007, 02:43 PM
http://www.mercurynews.com/mld/mercurynews/16404067.htm

Steve Jobs
The Showman
The Scandal
What's next?

APPLE'S BACKDATING SCANDAL

APPLE'S RISK-TAKER ALWAYS DRAWS A CROWD, BUT HIS ACTIONS MAY BITE HIM, HIS COMPANY

By Troy Wolverton
Mercury News

cynerjist
Jan 9, 2007, 02:17 PM
like many i certainly made money on this. i placed a limit order for just under 80 bucks per share.


if you were thinking of selling, don't dare do it until after mwsf where the analyst reports will be hyping the stock after something cool drops.

MWSF will probably not make you a happy AAPL stockholder. If this is the kind of ride you're seeking, invest in something else.

you seem pretty negative about apple stock. i think you just like arguing.
we can only wait and see. :-)


No, just experienced, and I don't mind sharing.

buh-buh-buh-booo-yaaaah IJ Reilly.

i can't wait to hear you spin this into something that somehow makes you right or more knowledgeable than me.

IJ Reilly
Jan 9, 2007, 07:31 PM
buh-buh-buh-booo-yaaaah IJ Reilly.

i can't wait to hear you spin this into something that somehow makes you right or more knowledgeable than me.

And the winner of the big Whatever Prize for today is...

No spin necessary. I am happy to be wrong, but as someone who invests for more than a day at a time, I will also be watching for the next few days and weeks. I think we remember what happened last year. We do, don't we?

The point I made hasn't changed in any event.

cynerjist
Jan 9, 2007, 08:03 PM
And the winner of the big Whatever Prize for today is...

No spin necessary. I am happy to be wrong, but as someone who invests for more than a day at a time, I will also be watching for the next few days and weeks. I think we remember what happened last year. We do, don't we?

The point I made hasn't changed in any event.

i mentioned it as a growth stock which implies i'm not a day trader. but anyway, i'm happy for all the shareholders, even the condescending ones.

it's been fun sparring with you, but i think the last guy broke the stick off and i've given up yanking at it. happy trails.

IJ Reilly
Jan 9, 2007, 08:26 PM
i mentioned it as a growth stock which implies i'm not a day trader. but anyway, i'm happy for all the shareholders, even the condescending ones.

it's been fun sparring with you, but i think the last guy broke the stick off and i've given up yanking at it. happy trails.

In fact, you seemed to be assuring a novice investor that AAPL would go up today. I don't let anyone get away with a statement like that without signing their name to the guarantee, if only because we know it's far from always true.

AidenShaw
Jan 13, 2007, 10:51 AM
http://www.mercurynews.com/mld/mercurynews/16452862.htm

U.S. attorney opens probe into Apple options rigging

By Troy Wolverton, Therese Poletti and Mark Schwanhausser
Mercury News

The U.S. Attorney's Office said late Friday that it has opened a criminal investigation into the stock options backdating scandal at Apple.

Luke Macauley, a spokesman for the U.S. Attorney's Office in San Francisco, declined to give details on the investigation. But a source familiar with the matter told the Mercury News on Friday that included in the probe is an option grant given to Apple Chief Executive Steve Jobs in 2001 that ranked among the largest in corporate history.

...

Apple has argued that Jobs did not benefit from any backdated options because the company canceled both the 2000 and 2001 grants. However, Apple replaced the grants with 7.5 million shares of restricted stock, of which Jobs still holds about 5.4 million shares currently worth about $511 million.

Apple described the trade at the time as an ``exchange.''

`` `In exchange for:' Those three words are pregnant with meaning,'' said compensation expert Graef Crystal. ``For them to make the statement that he surrendered the options and never received a benefit is so duplicitous, so mendacious, that everything they have to say is colored, in my mind.''

Patrick S. McGurn, director of Institutional Shareholder Services in Rockville, Md., on Friday called for Jobs to disgorge $20 million -- the amount of the accounting charge Apple took for the 2001 grant.

``It really is cruel and unusual punishment for the English language to try to come up with language that would indicate that he did not benefit from the award he received,'' said McGurn. ``Clearly, those awards were ultimately exchanged on a roughly value-for-value basis.''

...and this is in Apple's hometown newspaper...which usually prints stories gushing about how wonderful every Apple announcement is...

AidenShaw
Jan 14, 2007, 10:09 AM
From MacSurfer's Headline News™ (http://www.macsurfer.com/)

"Attorneys are focus of Apple probe: Regulators reportedly want to ask 2 lawyers about options" San Francisco Chronicle (http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2007/0/BUGVLNHT9M1.DTL&type=business)
"U.S. attorney opens probe into Apple options rigging" San Jose Mercury News (http://www.mercurynews.com/mld/mercurynews/news/16452862.htm)
"Timing of Jobs' Bite of Apple Comes Under Scrutiny: Federal investigators examine whether CEO's stock options grant broke the law." Associated Press (http://www.theledger.com/apps/pbcs.dll/article?AID=/20070113/NEWS/701130368/1001/BUSINESS)
"U.S. Investigates Options Grant To Apple CEO: Report" Reuters (http://www.techweb.com/showArticle.jhtml;jsessionid=JNBM2AD3QSQNQQSNDLPCKHSCJUNN2JVN?articleID=196900755)
"Apple still under investigation" New York Daily News (http://www.nydailynews.com/business/story/488254p-411170c.html)
"Nice Phone, Mr. Jobs, But ...: Steve Jobs may have a golden gut when it comes to cool tech products. But when it comes to dealing with regulators, it looks as if he and his company have a tin ear." New York Times (http://select.nytimes.com/gst/tsc.html?URI=http://select.nytimes.com/2007/0/business/13nocera.html&OQ=_rQ3D1Q26refQ3Dtechnology&OP=71eda83cQ2FQ25uJQ3CQ25Fp0Q5DQ5DFQ25Q27HHrQ25HQ5BQ25Q5BYQ25Q3C_pgzJppQ25Q5BYzQ5DbJ0Q5CQ26vFBR)

AidenShaw
Jan 18, 2007, 06:22 AM
Fortune Magazine: Apple's Jobs could face uphill court battle (http://money.cnn.com/magazines/fortune/fortune_archive/2007/01/22/8397968/index.htm?postversion=2007011605)

Is Jobs really cleared?

Despite being cleared by an internal investigation, the Apple CEO is still in legal hot water, and might need a better defense

By Roger Parloff, Fortune senior editor
January 17 2007: 11:20 AM EST

(Fortune Magazine) -- When Apple Computer disclosed on Dec. 29 the results of its own internal investigation into whether CEO Steve Jobs engaged in options-timing irregularities, the probe, conducted by a special committee of outside directors, "found no misconduct by current management," though it "raised serious concerns regarding the actions of two former officers."

The unnamed fall guys are widely reported to be former chief financial officer Fred D. Anderson and former general counsel and corporate secretary Nancy R. Heinen, who had also been Jobs' general counsel at Next.

Though most investors dearly hope the company's conclusion holds up, many can't quite suspend disbelief. "The idea that Nancy or Fred would've acted independently of the biggest control freak in the entire tech industry is laugh-out-loud funny," says one big Silicon Valley player.
...
The misdatings first began, the special committee found, in December 1997 - three months after Jobs was named interim CEO. The two grants to Jobs were among the largest in history: ten million shares ostensibly granted on Jan. 12, 2000 (when the stock hit its quarterly low), and 7.5 million more dated Oct. 19, 2001.