While it won't sue Apple for Nancy Heinen's alleged backdating of options, the SEC does want to talk to CEO Steve Jobs, most likely about the timing of events
Though Apple (AAPL) was given a clean bill of health by regulators over its involvement in the backdating of stock options, the investigation of a former executive continues to dog Chief Executive Steve Jobs.
Securities & Exchange Commission lawyers suing former Apple General Counsel Nancy Heinen over her alleged role in the matter have issued subpoenas to Jobs. The SEC has said it won't sue Apple over the backdating of grants, praising the company for its cooperation with the investigation. Attorneys say the company and current executives are unlikely to face criminal charges from the Justice Dept. or civil charges from the SEC.
Still, having spent months under a pall while the SEC and Apple's own investigators probed the matter, Jobs now faces the prospect of having his version of events questioned first in depositions and later in open court. The preparation for depositions and eventual testimony will keep backdating at Apple in the headlines for months, even as the company draws praise for rising sales and a climbing stock price. The subpoena was first reported by Bloomberg News.
The SEC alleges that on certain occasions when options were granted to executives, Heinen knowingly backdated and then doctored internal documents to cover her tracks. Options let the holder purchase shares at a discounted price, typically fixed on the date the securities are granted. In cases of backdating, the price is retroactively changed to a different date, typically giving the holder a bigger payout than they're due and helping the company conceal costs.
To build their case, Heinen's lawyers may look to another former Apple executive, former chief financial officer and director Fred Anderson, who was himself sued by the SEC in the same case as Heinen, but settled the claims in April. After the settlement was announced, Anderson, now a director at Elevation Partners, blasted Jobs in a letter (BusinessWeek.com, 4/25/07) issued through his lawyer, describing a different version of events than the one put forth by Apple in a statement issued in December, 2006.
Representatives of Apple and Heinen didn't respond to requests for comment. SEC attorney Marc Fagel declined to comment.
In Good Faith
At issue is precisely when Apple's board signed off on a grant of options. In the case of grants issued in February, 2001, Anderson says that Jobs told him that the board had signed off on the disputed grants weeks before, on Jan. 2, 2001. SEC lawyers say that approval hadn't been obtained before early February. This sequence of events could prove pivotal for both sides in the case, says Joel Bernstein, a securities lawyer in New York. "I'd surmise that [Heinen's side] is going to try to build on some of the information from Anderson's statement to argue that she had no knowledge that any of this could have been wrong," Bernstein says.
A source familiar with the thinking of Heinen's defense team says her lawyers will be focused less on assigning blame to someone else, and more on arguing that Heinen's actions surrounding the options grants were carried out in good faith and without any intent to deceive. That's in large part because Heinen's counsel is still pursuing the same defense strategy they've had since the start: Nobody did anything wrong at Apple. For Heinen to go after Jobs would only hurt the basic thrust of her own defense.