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Apple probe finds stock option grant irregularities

post #1 of 28
Thread Starter 
Apple Computer said on Thursday that an internal investigation has discovered irregularities related to the issuance of certain stock option grants made between 1997 and 2001.

One of the grants in question was to chief executive Steve Jobs, but it was subsequently cancelled and resulted in no financial gain to the CEO, the company said.

A special committee of Apple's outside directors has hired independent counsel to perform an investigation and the company has informed the Securities and Exchange Commission.

"Apple is a quality company, and we are proactively and transparently disclosing what we have discovered to the SEC," said Jobs. "We are focused on resolving these issues as quickly as possible."

Apple executives have been instructed to offer no further comments on the matter until the independent investigation is concluded.
post #2 of 28
Was this topic necessary?
Citing unnamed sources with limited but direct knowledge of a rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of a rumoured device - Comedy Insider (Feb 2014)
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post #3 of 28
Quote:
Originally posted by Ireland
Was this topic necessary?

Yes, dummy, because SEC investigations are serious, and the financial impact of governmental fines would affect the company.
"I have a dream, that one day, my posts will be judged by their content, not their spelling."
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post #4 of 28
Because it regards AAPL.
post #5 of 28
Quote:
Originally posted by Ireland
Was this topic necessary?

Yes, because Apple is a quality company.
post #6 of 28
This news caused AAPL to drop between $1-2 during after market trading. See AAPL Summary Quote at Nasdaq.
post #7 of 28
Quote:
Originally posted by Ireland
Was this topic necessary?

Anything that doesn't praise the all-mighty Apple is not necessary, right?
'L'enfer, c'est les autres' - JPS
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'L'enfer, c'est les autres' - JPS
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post #8 of 28
Quote:
Originally posted by Gene Clean
Anything that doesn't praise the all-mighty Apple is not necessary, right? [/B]

In the view of our friendly neighbor Ireland, topics are obviously only relevant if they praise Apple, or if they criticize that Apple's main market happens not to be Ireland.
post #9 of 28
http://biz.yahoo.com/ap/060629/apple...ions.html?.v=3

"The troublesome stock options included a batch that went to Apple co-founder Steve Jobs, but the chief executive canceled those awards in March 2003 before he cashed them in to realize a gain. Jobs surrendered all of his outstanding options in exchange for 5 million shares of Apple stock now worth $295 million."

Thius could be the end of Steve Jobs.
post #10 of 28
Quote:
Originally posted by Johnny Mozzarella
Yes, because Apple is a quality company.

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

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Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply
post #11 of 28
More from the article...

The stock option news, released after the market closed, appeared to jar investors. Apple shares surged $2.95, or 5.3 percent, to close at $58.97 on the Nasdaq Stock Market, then retreated by $1.42 in extended trading.

Most of the stock option investigations so far have revolved around a practice known as "backdating."

This occurs when a handful insiders retroactively decide to set a stock option's exercise price at an ebb in a company's stock price instead of pegging the exercise price to the prevailing market value at the time of the award.

Stock options become more valuable as the market price rises above the exercise price, so backdating fattens the recipient's profit.

Backdating stock options isn't necessarily illegal, but it can cause a company to improperly deduct employee compensation expenses -- a misstep that could exaggerate profits and result in an underpayment of taxes.

If the backdating isn't properly disclosed, regulators also might interpret the action as a form of financial fraud, exposing companies to civil penalties and a raft of shareholder lawsuits.

Apple didn't say whether its stock option trouble involved backdating.

Meanwhile, two other Silicon Valley companies disclosed widening investigations into their previously disclosed backdating issues. Both Mountain View, Calif.-based Intuit Inc. and Foster City, Calif.-based Equinix Inc. said they had received Justice Department subpoenas seeking more information about their past stock options.

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply
post #12 of 28
Quote:
Originally posted by Johnny Mozzarella
Yes, because Apple is a quality company.

Does that make your post quality humor?
post #13 of 28
Quote:
Originally posted by m01ety
Yes, dummy, because SEC investigations are serious, and the financial impact of governmental fines would affect the company.

Why say dummy? You wouldn't say it to my face. (I don't want to argue online cause it's ridiculous so let's take this outside)
Citing unnamed sources with limited but direct knowledge of a rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of a rumoured device - Comedy Insider (Feb 2014)
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post #14 of 28
Quote:
Originally posted by Chucker
In the view of our friendly neighbor Ireland, topics are obviously only relevant if they praise Apple, or if they criticize that Apple's main market happens not to be Ireland.

What the hell are you talking about? This time you've lost the plot.
Citing unnamed sources with limited but direct knowledge of a rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of a rumoured device - Comedy Insider (Feb 2014)
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post #15 of 28
Quote:
Originally posted by Ireland
What the hell are you talking about? This time you've lost the plot.

Why was the original post unneccesary, in your eyes?
"Many people would sooner die than think; in fact, they do so." - Bertrand Russell
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"Many people would sooner die than think; in fact, they do so." - Bertrand Russell
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post #16 of 28
Quote:
Originally posted by Ireland
Why say dummy? You wouldn't say it to my face.

I most certainly would, and most certainly did. The term, while comparatively benign compared to alternative expressions readily available to me, accurately expressed that your disregard for the severity of news involving the company and the SEC is, quite simply, foolish.

"I have a dream, that one day, my posts will be judged by their content, not their spelling."
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"I have a dream, that one day, my posts will be judged by their content, not their spelling."
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post #17 of 28
It's an important matter. It baffles me how someone could disagree.
post #18 of 28
I do agree that Apple is a quality company. They are quite conservative financially. If you check their debt load, you can see that. This was likely something that was either in error, or was done by the executives privately, without informing the financial department. This just isn't an Apple type of transaction.
post #19 of 28
Quote:
Originally posted by blabla
http://biz.yahoo.com/ap/060629/apple...ions.html?.v=3

"The troublesome stock options included a batch that went to Apple co-founder Steve Jobs, but the chief executive canceled those awards in March 2003 before he cashed them in to realize a gain. Jobs surrendered all of his outstanding options in exchange for 5 million shares of Apple stock now worth $295 million."

Thius could be the end of Steve Jobs.

First off, I don't see how he could cancel the awards and then subsequently cash them in to realize a gain. If they are cancelled, they aren't there to cash in.

Second, I think that I and a majority of Apple shareholders think that Steve Jobs is worth way more than all the compensation he was given in all forms including the shares, jet, etc. Apple is a clear case where the management including the CEO has added tremendous value to the company. In fact, if Steve didn't come back, there very well may not still be an Apple today.

This looks like a mistake and even if backdating did happen, backdating is only sometimes illegal. Apple being upfront about it should lessen any penalties.

To say that this could be the end of Steve Jobs is insanity. He has been through stuff 100 times worse than this and came out on top.
post #20 of 28
Hopefully they're not the next Enron. I was hoping Microsoft would be.
post #21 of 28
Quote:
Originally posted by melgross
I do agree that Apple is a quality company. They are quite conservative financially. If you check their debt load, you can see that. This was likely something that was either in error, or was done by the executives privately, without informing the financial department. This just isn't an Apple type of transaction.

If only the US Government would take a lesson from Apple.
post #22 of 28
Quote:
Originally posted by Placebo
Hopefully they're not the next Enron. I was hoping Microsoft would be.

You apparently have no understanding of what is going on.
post #23 of 28
Quote:
Originally posted by MacCentric
You apparently have no understanding of what is going on.

Amen to that.
-ReCompile-
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-ReCompile-
"No matter where you go, There you are"
- Buckaroo Bonzai
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post #24 of 28
Quote:
Originally posted by MacCentric
First off, I don't see how he could cancel the awards and then subsequently cash them in to realize a gain. If they are cancelled, they aren't there to cash in.

You're misreading this (and, by the way, if you read it one way, it looks really, really, really bad). As it reads,

"but the chief executive canceled those awards in March 2003 before he cashed them in to realize a gain. Jobs surrendered all of his outstanding options in exchange for 5 million shares of Apple stock now worth $295 million."

He cancelled the awards before he could cash them in to realize a gain. But he didn't just cancel them, per se. He exchanged them for full stock. So improperly gained options were used to trade for stock. I could see that being problematic. Especially depending on how they recorded it all in the books.

Quote:
Originally posted by MacCentric
Second, I think that I and a majority of Apple shareholders think that Steve Jobs is worth way more than all the compensation he was given in all forms including the shares, jet, etc. Apple is a clear case where the management including the CEO has added tremendous value to the company. In fact, if Steve didn't come back, there very well may not still be an Apple today.

I would question the statement "worth way more then his compensation". If that were the case, wouldn't there be a call to raise his compensation?

Quote:
Originally posted by MacCentric
This looks like a mistake and even if backdating did happen, backdating is only sometimes illegal. Apple being upfront about it should lessen any penalties.

Oh, that's right. You've rewrote "isn't necessarily" as "only sometimes" illegal. Great. And its all about expensing, not the backdating itself. It could be that its not illegal at all, but causes severe shockwaves through the entire financial picture of Apple. And if it does become true, then there's going to be even more skeptacism about Apple's finances and reporting. Its not a question of penalties, fines, or prison. Its about not trusting the company any more, which will kill the stock price.

Quote:
Originally posted by MacCentric
To say that this could be the end of Steve Jobs is insanity. He has been through stuff 100 times worse than this and came out on top.

Like what? I don't recall him ever going up against the SEC over quetionable stock plans. Personal experiences don't matter in these things. Especially since this took place mostly under his watch and, let's be serious here, nothing gets done at Apple without Steve's permission.
post #25 of 28
Quote:
Originally posted by MacCentric
You apparently have no understanding of what is going on.

Quote:
Originally posted by ReCompile
Amen to that.

Sarcasm doesn't work on the internet, case study #6349821.
post #26 of 28
Quote:
Originally posted by Placebo
Sarcasm doesn't work on the internet, case study #6349821.

Surprised?
post #27 of 28
Quote:
Originally posted by Louzer
You're misreading this (and, by the way, if you read it one way, it looks really, really, really bad). As it reads,

"but the chief executive canceled those awards in March 2003 before he cashed them in to realize a gain. Jobs surrendered all of his outstanding options in exchange for 5 million shares of Apple stock now worth $295 million."

He cancelled the awards before he could cash them in to realize a gain. But he didn't just cancel them, per se. He exchanged them for full stock. So improperly gained options were used to trade for stock. I could see that being problematic. Especially depending on how they recorded it all in the books.

Part of that was sarcastic to illustrate what I feel is sloppiness in the original article. I believe you are also mischaracterizing the situation. The options are not even alleged as being improperly gained, plus there are also other options included in that total which are not disputed. Everyone knew he was getting them including the board and the shareholders. Proposals made at shareholder meetings to reign in Apple's option granting were voted down by wide margins. The issue is perhaps on a strike price where it may be set lower thus making the options more valuable than was expensed.

However during the trade in when they cancelled the options and instead issued him stock, EVERYONE knew the value of the options at that time, and EVERYONE knew the value of the stock he was being granted and there was precious little dissent from anyone. I remember that Apple wanted to have a more clear picture of what they would have to spend at this time as shareholders were getting nervous about all of the outstanding options at the time.

Let's also keep in mind that during the last few years there have been major changes in how options need to be expensed and reported. One can't apply today's rules to transactions which happened in the past.

Quote:
Originally posted by Louzer
I would question the statement "worth way more then his compensation". If that were the case, wouldn't there be a call to raise his compensation?

Well, if a motivated seller wants to unload a house quickly for less than the market value, how many buyers will argue and demand that they pay the market value for the house?

Put another way, if Steve were to threaten to walk away from Apple if he did not receive double the compensation he received, how many shareholders would rather have him walk than increase the compensation. I submit that there would be very few.

Quote:
Originally posted by Louzer

Oh, that's right. You've rewrote "isn't necessarily" as "only sometimes" illegal. Great. And its all about expensing, not the backdating itself. It could be that its not illegal at all, but causes severe shockwaves through the entire financial picture of Apple. And if it does become true, then there's going to be even more skeptacism about Apple's finances and reporting. Its not a question of penalties, fines, or prison. Its about not trusting the company any more, which will kill the stock price.

Like what? I don't recall him ever going up against the SEC over quetionable stock plans. Personal experiences don't matter in these things. Especially since this took place mostly under his watch and, let's be serious here, nothing gets done at Apple without Steve's permission.


As far as corporations go, fiscally, I feel that Apple is top notch. I also feel that Steve Jobs is one of the most honest and valuable CEO's around. I doubt he is in it for the money and if they do find irregularities, I'm sure he will be the first to offer to give back the amount in question even if he does not need to, simply because it is the right thing to do. The board and the shareholders I am sure would be glad to do/have done whatever is necessary to straighten everything out so that he is officially entitled to have whatever he has gotten.
post #28 of 28
Quote:
Originally posted by Placebo
Sarcasm doesn't work on the internet, case study #6349821.

Sorry, I have seen way too many "Teh Apple is teh DOOMED" posts over the past 12 or so years that I have been following Apple. I am usually pretty good on picking up on sarcasm. Again, I apologize
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