Compliance Toolkit

Apple execs reaped 'millions' in unlawful profits, shareholders allege

Tags:
Stock Options,
Shareholders

Colin Barker ZDNet.co.uk

Published: 23 Aug 2006 17:25 BST

Life for Apple's lawyers became even busier this week after a fourth lawsuit over stock options allegedly granted on the wrong dates was filed.

On Tuesday, lawyers acting on behalf of Apple shareholders filed actions against the company claiming that it "manipulated options grants to sell more than US$1bn in company stock", according to Bloomberg News.

At least three other actions along similar lines have already been placed in US courts. The lawsuits all claim that the company's chief executive, Steve Jobs, and other executives backdated their share options, and later cashed them in shortly before Apple's stock price fell.

"The practice of repeatedly and consciously backdating stock options granted to Apple's executives and directors remained concealed from the public and its shareholders," the action against Apple alleges.

Under US law, if an executive cashes in options knowing that the share price is likely to fall, then that action may be illegal. In any case, large sales of executive share options during periods of rapid market movement almost invariably attract shareholder suspicion.

But a particular issue is one of the "backdating" of share options. This is when a company allows executives to backdate their options by moving the date the options were granted to a period when the share price was at its lowest in a given quarter.

Other companies under scrutiny at the moment include Rambus, where ex-chief executive Geoff Tate announced he was quitting the company as more details emerged of his role in the allocation of stock options. Autodesk earlier this month announced it was not publishing a full set of results while it was pursuing inquiries of its own to ensure its stock options had been handled properly.

Juniper Networks, Brocade, Comverse and Nvidia have faced, or are facing, inquiries into the disposal of share options and especially the timing of such disposals.