Summary
Apple Computer today (October 4, 2006) acknowledged that its Founder/CEO Steve Jobs was aware of certain instances of stock option backdating prior to fiscal 2003. While likely to be sanctioned by the SEC, I currently believe, as a former SEC Assistant Chief Accountant, that Jobs will likely be able to retain his director and officer roles.
Analysis
In a Form 8-K filed today, Apple Computer acknowledges, among other items, the following: “In a few instances, Apple CEO Steve Jobs was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications.” While SEC and/or DOJ prosecutions of violations of the federal securities laws typically assert that a director, officer or employee was “reckless or reckless in not knowing,” I believe, if Apple’s acknowledgements are factually accurate, that Jobs will ultimately be allowed to retain his current roles with Apple. My belief is based on Apple’s disclosure that Jobs “did not receive or otherwise benefit from these [backdated] stock option grants and was unaware of the accounting implications.” However, consistent with the aforementioned “reckless in not knowing” enforcement premise, I do believe that Jobs will likely be subjected to a cease and desist order prohibiting him from any further violations of the federal securities laws. Any subsequent failure by Jobs to comply with such a cease and desist order would have serious consequences, including but limited to, criminal prosecution.
