Apple: Jobs in Jeopardy?

Anonymous but supposedly knowledgeable sources cited in recent news articles assert that premeditated fraud was involved in the granting of certain stock options at Apple.  With such assertions once again comes the speculation as to whether Steve Jobs will survive Apple’s stock option scandal.  As a former Assistant Chief Accountant with the SEC’s Division of Corporation Finance, this posting attempts to provide guidance to those attempting to assess the situation. 

I believe the question of Job’s survival comes purely down to whether he had any personal involvement in the orchestrating of any fraudulent activities underlying inappropriately granted or backdated stock options.  To the extent that Jobs had any such involvement, it is highly improbable that he will survive as any civil and criminal prosecutions, or settlements thereof, by the SEC or DOJ, respectively, will certainly seek (and likely obtain) his removal from Apple. 

In its October 4, 2006 Form 8-K, Apple acknowledged, 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 [emphasis added].”  If the preceding representation is ultimately proven to be the full extent of Jobs’ knowledge and involvement (i.e., the absence of any fraudulent intent), then I continue to believe that Jobs will be allowed to retain his current roles with Apple.  However, consistent with the “reckless in not knowing” underpinning of many SEC enforcement actions, I continue to believe that Jobs will likely be subjected to a cease and desist order prohibiting him from any further violations of the federal securities laws.