Gov't unlikely to 'nail Apple and Steve Jobs'

Posted:
in General Discussion edited January 2014
Renewed concerns over Apple Computer's options issues are "valid but overdone," according to one Wall Street analyst, who says it is unlikely that the federal government is looking to make an example out of the corporate icon or its well-respected chief executive.



In a note to clients released Thursday morning, American Technology Research analyst Shaw Wu said a report released by law publication The Recorder this week offered "little new information" regarding Apple's options irregularities, with the most noteworthy news being that chief executive Steve Jobs has recently hired personal legal representation.



"In our view, given the seriousness of this investigation, we are surprised Steve Jobs didn't hire personal legal help earlier," Wu told clients. "Nonetheless, we continue to believe in our long-standing view that even in the worst case scenario where Apple is guilty of improper options grants, we do not believe Steve Jobs is liable, the reason being that the compensation committee at Apple is run by an independent board that is not comprised of Apple employees."



The analyst said he recently consulted with some of his most trusted sources regarding Apple's overall options matter, including a Harvard-law educated, former SEC employee with nearly a decade of Wall Street experience. Those sources, Wu said, indicated that options backdating is a widespread and commonplace problem affecting as many as 30 to 35 percent of Fortune 500 companies.



"Given the widespread nature, we doubt the SEC and Department of Justice will pursue a broad 'witchhunt' forcing key executives to step down that would undermine the recovery of the US economy," he wrote. "Not to sound like conspiracy theorists, but we do not believe it makes sense for the US government to nail Apple and Steve Jobs, one of the most respected American companies and businessmen of the past 100 years."



The analyst said a more likely scenario would be for the feds to tighten their enforcement on options backdating to ensure it doesn't happen in the future. He therefore views the recent pull-backs in Apple's share price as an opportunity for nimble investors to buy into the company during a slow week, when many Wall Street figures are away from their desks on vacation.



"For those of you who missed yesterday's window, we do not think it is too late to begin stepping in," he wrote. "That said, we encourage investors (particularly those with a longer term investment horizon) to be buying Apple on dips as we believe Apple shares have upside to $99 based on our checks of strong December quarter momentum and a strong product pipeline in 2007."



Some of the positive catalysts the analyst expects will buoy the company's shares in the near-term are: Mac OS X Leopard in in the first half of 2007, iTV in the first quarter, new movie content partners, a new widescreen and Bluetooth iPod features, and cell phones.



In the meantime, Wu said the issue at hand is the quality of evidence that is being discovered by federal investigators digging into Apple's options mess. "The type of crime that is alleged is very serious from the standpoint of prosecutors and shareholders, whether the prosecutions are made under the rubric of forgery, fraud, misappropriation of assets or some other crime," he wrote. "The news from Law.com may be significant because the prosecutors may have discovered a documentary 'smoking gun' (i.e. a document that was clearly forged) that would make their case much easier to prosecute (and therefore more likely to proceed) than if they were relying solely on oral testimony from those involved."



Still, it's the analyst's belief that prosecutors are unlikely to be leaking such evidence at this stage and it would therefore "be imprudent to speculate about the strength of their case" based on news reports alone.



"The bottom line is that 'falsification of documents' and 'options backdating' are serious yet closely inter-related, and we do not think it is likely that Apple will be used to make an example by the government," he told clients.



Wu maintained his Buy rating on shares of Apple, forecasting the company to report earnings-per-share of $0.79 on sales of $6.4 billion for its fiscal first quarter of 2007 come January.
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Comments

  • Reply 1 of 26
    If all your posts were taken away that contained the words "poo" or "holy rigatoni," your post count would probably be 57.
  • Reply 2 of 26
    Hmmm?. sounds like they are trying to bide their time so they can have a slow and steady sell of stock, rather then a massive flood into the market.
  • Reply 3 of 26
    Wu is blathering on this one: he is completely off is rockers, and seemingly beyond his sphere of competence. He has himself completely tied up in knots.



    His argument runs something along the lines of: "I don't think it is a problem because a friend said so, and because Steve Jobs is important for the US economy; on the other hand, this is very serious so it could be a problem -- in fact I think it is a problem -- yet, it is imprudent to speculate. But I don't think it is a problem since the US government is nice, and they won't make an example of Steve Jobs."



    Huh?



    Any wonder that the stock is volatile?!



    (PS: I am watching CNBC right now, and a story about Jobs being in a pickle in coming right up!).
  • Reply 4 of 26
    Quote:
    Originally Posted by opuscroakus View Post


    If all your posts were taken away that contained the words "poo" or "holy rigatoni," your post count would probably be 57.



    6 down, so far.
  • Reply 5 of 26
    Save yourself the grief of reading this and look back at Tuesday's article. Hell, when did this first come to light, March? Go read from back then. It's the same crap.
  • Reply 6 of 26
    quinneyquinney Posts: 2,521member
    Quote:
    Originally Posted by AppleInsider View Post


    "Nonetheless, we continue to believe in our long-standing view that even in the worst case scenario where Apple is guilty of improper options grants, we do not believe Steve Jobs is liable, the reason being that the compensation committee at Apple is run by an independent board that is not comprised of Apple employees."



    This is most important. In many companies, the compensation committee is NOT

    independent. They are under command of the Board of Directors, which often

    includes the CEO. Thus the CEO would be capable of ordering fraud.



    In the case of Apple, with its INDEPENDENT compensation committee, Steve Jobs

    does not have the authority to order them to do anything.
  • Reply 7 of 26
    Quote:
    Originally Posted by quinney View Post


    This is most important. In many companies, the compensation committee is NOT

    independent. They are under command of the Board of Directors, which often

    includes the CEO. Thus the CEO would be capable of ordering fraud.



    In the case of Apple, with its INDEPENDENT compensation committee, Steve Jobs

    does not have the authority to order them to do anything.



    What Wu said is: "..... independent board that is not comprised of Apple employees." (bold mine).



    Unfortunately, "non-Apple employee" does not equal "independence" -- the former simply is "outsider" (i.e., "independence" does not equal "outsider" in boards -- e.g., consider a CEO's spouse, family member, etc). Also, it is not clear if he is referring to the board at present (since he is using the present tense in that sentence), or if he is talking about the board in 2001 (which seems to have been when the questionable 7.5 million options were granted) or whenever the backdating occurred.



    That is why I said that Wu is completely off-base: He seems to have no clue about corporate governance issues.



    That said, I hope the conclusion -- that Apple and Jobs do not get fingered by the SEC -- turns out be true. It is just that Wu's analysis leading up to the conclusion makes no sense whatsoever.
  • Reply 8 of 26
    I agree that Steve Jobs will very unlikely go to jail or anything, since he did surrender the stock before exercising it.... so it's hardly unlikely it will turn into a situation like Martha Stewart who had a gleam in the eye to make money right from the outset. However, as a public company if someone misrepresents a board meeting, it is a pretty serious offense especially since it was connected to stock distributions, exercised or not. How could anyone let that happen at Apple? It wasn't like in 2001 they wern't a profitable & rich company. So, anyway --- hey guys and gals, I've got this dusty old set of depositions of Bill Gates (over 17 hours on 11 DVD's) recorded a few years ago, I've kept in solid condition. I've seen it twice -- so if anyone wants it please e-mail me @ [email protected] with a solid offer and it's yours! It really does shine allot more light on the whole industry enterprise going back to Apple & IBM, etc..... IMO - this will go on until it's resolved & hopefully at the end of the day our corporations are more trustworthy inside & out.



    Best regards, ISV
  • Reply 9 of 26
    THE FEDERAL RESERVE IS A FRAUD,APPLE IS NOT AN ILLUMINATI COMPANY AND THEY ARE TRYING TO PROTECT THEIR PROPERTY and profits FROM THE DAMN ILLUMINAZI CORPORATE MOB BASTARDS.





    CHeers for apple and down with the New World Order......



  • Reply 10 of 26
    He did make a profit. A pretty nice sum too. Check the other thread and see how much. If Martha gets sent to the big house for 60K, I'm sure they would send ole Steve there too. Difference is, Martha used inside information to make her gain, and it's not the same as what Steve and Apple has been accused of.



    Quote:
    Originally Posted by AXC View Post


    I agree that Steve Jobs will very unlikely go to jail or anything, since he did surrender the stock before exercising it.... so it's hardly unlikely it will turn into a situation like Martha Stewart who had a gleam in the eye to make money right from the outset. However, as a public company if someone misrepresents a board meeting, it is a pretty serious offense especially since it was connected to stock distributions, exercised or not. How could anyone let that happen at Apple? It wasn't like in 2001 they wern't a profitable & rich company. So, anyway --- hey guys and gals, I've got this dusty old set of depositions of Bill Gates (over 17 hours on 11 DVD's) recorded a few years ago, I've kept in solid condition. I've seen it twice -- so if anyone wants it please e-mail me @ [email protected] with a solid offer and it's yours! It really does shine allot more light on the whole industry enterprise going back to Apple & IBM, etc..... IMO - this will go on until it's resolved & hopefully at the end of the day our corporations are more trustworthy inside & out.



    Best regards, ISV



  • Reply 11 of 26
    Quote:
    Originally Posted by anantksundaram View Post


    Wu is blathering on this one: he is completely off is rockers, and seemingly beyond his sphere of competence. He has himself completely tied up in knots.



    His argument runs something along the lines of: "I don't think it is a problem because a friend said so, and because Steve Jobs is important for the US economy; on the other hand, this is very serious so it could be a problem -- in fact I think it is a problem -- yet, it is imprudent to speculate. But I don't think it is a problem since the US government is nice, and they won't make an example of Steve Jobs."



    Huh?



    Any wonder that the stock is volatile?!



    (PS: I am watching CNBC right now, and a story about Jobs being in a pickle in coming right up!).



    Quick, Wu-man! To the Reitzes Royce!







    8) 8) 8)
  • Reply 12 of 26
    The major sites are starting to pick up the story.

    http://www.msnbc.msn.com/id/16373057/
  • Reply 13 of 26
    quinneyquinney Posts: 2,521member
    Quote:
    Originally Posted by anantksundaram View Post


    What Wu said is: "..... independent board that is not comprised of Apple employees." (bold mine).



    Unfortunately, "non-Apple employee" does not equal "independence" -- the former simply is "outsider" (i.e., "independence" does not equal "outsider" in boards -- e.g., consider a CEO's spouse, family member, etc). Also, it is not clear if he is referring to the board at present (since he is using the present tense in that sentence), or if he is talking about the board in 2001 (which seems to have been when the questionable 7.5 million options were granted) or whenever the backdating occurred.



    That is why I said that Wu is completely off-base: He seems to have no clue about corporate governance issues.



    That said, I hope the conclusion -- that Apple and Jobs do not get fingered by the SEC -- turns out be true. It is just that Wu's analysis leading up to the conclusion makes no sense whatsoever.



    Will you please list the names of the compensation committee members you consider to

    be corrupt, and their relationships to Apple executives?



    If you have expertise in corporate governance issues, you probably know that when

    companies structure themselves to have independent compensation committees,

    they do so for the purpose of eliminating the perception of conflict of interest in the

    granting of executive compensation (relative to compensation committees made up

    of the executives themselves). If a company filled the comp. comm. with their

    relatives, as you suggest, that would defeat the purpose of the exercise. Note that

    the composition of these committees is published with the companies' corporate

    filings.
  • Reply 14 of 26
    Quote:
    Originally Posted by quinney View Post


    Will you please list the names of the compensation committee members you consider to

    be corrupt, and their relationships to Apple executives?



    If you have expertise in corporate governance issues, you probably know that when

    companies structure themselves to have independent compensation committees,

    they do so for the purpose of eliminating the perception of conflict of interest in the

    granting of executive compensation (relative to compensation committees made up

    of the executives themselves). If a company filled the comp. comm. with their

    relatives, as you suggest, that would defeat the purpose of the exercise. Note that

    the composition of these committees is published with the companies' corporate

    filings.



    Are you illiterate? Or is the problem stupidity? Did you even read what I wrote? And, while you are at it, whom did I call "corrupt?"
  • Reply 15 of 26
    quinneyquinney Posts: 2,521member
    Quote:
    Originally Posted by anantksundaram View Post


    Are you illiterate? Or is the problem stupidity? Did you even read what I wrote? And, while you are at it, whom did I call "corrupt?"



    When you wrote "Unfortunately, "non-Apple employee" does not equal "independence" -- the former simply is "outsider" (i.e., "independence" does not equal "outsider" in boards -- e.g., consider a CEO's spouse, family member, etc). " you implied that Apple's independent

    compensation committee contained spouses, family members, etc. You further implied that

    they are not independent, and therefore dependent, and therefore present to do the

    bidding of the board, and therefore corrupt.



    So again I ask you to list the names of the members of Apple's compensation committee

    whom you believe are somehow questionable. If you cannot, then you probably should

    keep your defamatory implications to yourself.
  • Reply 16 of 26
    Quote:
    Originally Posted by quinney View Post


    When you wrote "Unfortunately, "non-Apple employee" does not equal "independence" -- the former simply is "outsider" (i.e., "independence" does not equal "outsider" in boards -- e.g., consider a CEO's spouse, family member, etc). " you implied that Apple's independent

    compensation committee contained spouses, family members, etc. You further implied that

    they are not independent, and therefore dependent, and therefore present to do the

    bidding of the board, and therefore corrupt.



    So again I ask you to list the names of the members of Apple's compensation committee

    whom you believe are somehow questionable. If you cannot, then you probably should

    keep your defamatory implications to yourself.



    Sorry, sir.... . If you couldn't begin to understand that my comment was about the absurdity of the logic in Wu's analysis, and the fact that AAPL's stock price volatility is probably explained by market commentators such as Wu making tortured and bombastic assertions about whether or not Jobs will get "nailed" by the US government -- and not about whether Apple's compensation committee is/was/will be "independent" (btw, as I mentioned before, I have no idea whether Wu is talking about the present, about 2002, 2001, whenever) -- it is rather pointless.
  • Reply 17 of 26
    quinneyquinney Posts: 2,521member
    Quote:
    Originally Posted by anantksundaram View Post


    Sorry, sir.... . If you couldn't begin to understand that my comment was about the absurdity of the logic in Wu's analysis, and the fact that AAPL's stock price volatility is probably explained by market commentators such as Wu making tortured and bombastic assertions about whether or not Jobs will get "nailed" by the US government -- and not about whether Apple's compensation committee is/was/will be "independent" (btw, as I mentioned before, I have no idea whether Wu is talking about the present, about 2002, 2001, whenever) -- it is rather pointless.



    Ok, let us examine Wu's logic and your comment attempting to show that it was absurd.



    Wu's statement: "Nonetheless, we continue to believe in our long-standing view that even in the worst case scenario where Apple is guilty of improper options grants, we do not believe Steve Jobs is liable, the reason being that the compensation committee at Apple is run by an independent board that is not comprised of Apple employees."



    To distill the statement: Steve Jobs is NOT LIABLE because the compensation committee is

    independent. (this means they make compensation decisions independent from orders from

    Steve Jobs)



    Contrary to your most recent post, whether or not Jobs gets nailed is VERY MUCH about

    whether he created the option grant for himself, or whether it was created by someone

    who did not even answer to him in the corporate heirarchy. If the sole reason you have

    for considering this logic absurd is that you believe the compensation committee is not

    truly independent, and you cannot give an example supporting this belief, then your

    argument does not have a leg to stand on. If you still believe that Wu's logic is absurd,

    then I give up trying to convince you.



    Regarding the volatility of AAPL stock (or the stock of any widely held public company for

    that matter), it is common knowledge that publicized statements of market analysts

    can have an effect on short-term price. Nobody was arguing about that, and most people

    wouldn't bother posting that idea. Now if Jobs is forced out by some SEC action, it will

    absolutely have a large negative effect on AAPL stock, and the comments of analysts

    will in retrospect not seem at all bombastic.
  • Reply 18 of 26
    I smell a SLAP FIGHT coming on!
  • Reply 19 of 26
    blah64blah64 Posts: 892member
    Quote:
    Originally Posted by embee View Post


    I smell a SLAP FIGHT coming on!



    Hahaha, no doubt. And as of now quinney is winning. anantksundaram is sidestepping the question and resorted to unfounded name-calling. But it's only what, round 4? heh
  • Reply 20 of 26
    Quote:
    Originally Posted by Catman4d2 View Post


    THE FEDERAL RESERVE IS A FRAUD,APPLE IS NOT AN ILLUMINATI COMPANY AND THEY ARE TRYING TO PROTECT THEIR PROPERTY and profits FROM THE DAMN ILLUMINAZI CORPORATE MOB BASTARDS.





    CHeers for apple and down with the New World Order......







    Clearly, you know DICK about the Illuminati and the mere fact that it isn't part of the BUSH NeoCon world.



    Apple is an incredibly talented company and having worked there the notion it has some "inner sanctum" that harkens to hidden mysteries is is absurd as calling Bush an illuminated mind.
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