Something's Rotten at Apple: 15 Instances of Options Backdating Found

| About: Apple Inc. (AAPL)

Apple Computer (NASDAQ:AAPL) disclosed yesterday that its internal investigation of the company’s stock options practices found 15 instances between 1997 and 2002 in which grant dates preceded approval dates - in other words, 15 instances of options backdating.Worse, the company said that CEO Steve Jobs “in a few instances…was aware that favorable grant dates had been selected,” although he did not “receive or otherwise benefit from those grants.”

Apple said that the investigation “found no misconduct by any member of Apple’s current management team.” However, Apple also said that the investigation “raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants.” Apple said it will provide “all details regarding their actions to the SEC.”

The company also said that former Apple CFO Fred Anderson, now a partner at Elevation Partners, the media-focused buyout firm founded by investor Roger McNamee, had resigned as a director of the company. Anderson was CFO from 1996 to 2004, and according to Apple’s announcement told the company he thought that it was “in Apple’s best interests that he resign from the board at this time.” Apple did not specifically say that Anderson was one of the two people involved with the questionable grants - although it seems like a safe assumption - and it did not immediately identify any other people implicated in the investigation.

Anderson is also a director at eBay (NASDAQ:EBAY) and Move (NASDAQ:MOVE).

The company said it continues to expect that it will need to restate historical financial statements to record non-cash charges for compensation expense relating to past options grants. Apple said it is still reviewing the SEC’s accounting guidance and have not yet determined the amount of such charges, the resulting tax impact or which periods will have to be restated.

In a statement, Steve Jobs said: “I apologize to Apple’s shareholders and employees for these problems, which happened on my watch. They are completely out of character for Apple. We will work now to resolve the remaining issues as quickly as possible and to put the proper remedial measures in place to ensure that this never happens again.”

In after hours trading, Apple shares are actually up 10 cents at $75.48.

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