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Breaking: Apple Backdating Charges, A Settlement And The ‘Apple Rule’ Put To The Test

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The force field that seems to have protected Steve Jobs from the harsh scrutiny that the press and regulators have applied to other executives allegedly involved in stock options backdating is being put to the test today. The Securities and Exchange Commission filed charges against two former Apple executives—former chief financial officer Fred Anderson and former general counsel Nancy Heinen. And one of them has reacted by pointing an accusatory finger at the man at the top of the Apple.
Each of the two formers have reacted very differently to the charges. Heinen has vowed to fight the backdating charges, joining the thin ranks of other corporate executives who have decided to fight the SEC rather than settle. Anderson is going the other way. The announcement of his settlement with the SEC was made right after the charges were filed. But Anderson didn’t just settle—he released a statement placing the blame for the backdating of stock options at Apple squarely on the shoulders of chief executive Steve Jobs.
The statement shreds one of Jobs strongest lines of defense—that he didn’t understand the accounting implications of changing the options grant dates. Anderson’s statement has Steve Jobs as the key actor at each of the critical points. It sounds as if the ‘Apple Rule’—the unwritten rule protecting high-profile, popular executives (but not unpopular executives or formers) that regulators, prosecutors and the press seem to follow on backdating—is about to take a pounding.
The stock is trading up on the news—perhaps under the impression that the Apple Rule will continue to protect Jobs—but the reactions from the press and online media have been swift and punishing.
ValleyWag predicts that Jobs may face charges, going so far as to announce that its editor has sold out his position.
“Disclosure. I just sold all my Apple stock, before writing this post. (The stock is soaring, but I can't believe traders have properly digested the news.) Steve Jobs, the company's hugely valuable chief executive, must now be squarely in the sights of securities regulators,” ValleyWag says.
Endgadget also smells blood in the waters of Cupertino, where Apple’s headquarters is located. “The tech exec superstar who's largely gotten off clean despite Apple's lingering backdated stock options scandal is now being publicly blamed for wrongdoings by former Apple CFO Fred Anderson,” Endgaget writes.
Perhaps the most surprising reaction comes from Business 2.0’s blog, which examines how Jobs and Anderson dealt with their backdated stock options and concludes that the difference proves that Anderson is financially much smarter than Jobs. Anderson reportedly made as much as $3.5 million on his backdated stock options—an amount he has now agreed to “disgorge” (read: fork-over) to the government—while Jobs exchanged his backdated stock options for restricted shares. Jobs trade means he missed out on a $3.6 billion gain.
Oddly enough, that financially unsound decision may be what keeps Jobs out of trouble on backdating. He can credibly claim that he did not profit from the backdated stock options since he never cashed them in. But prosecutors and regulators have already shown a willingness to bring charges in other cases where executives did not personally see profits from backdating, so this might not be enough to keep the Apple Rule intact.
SEC files charges against 2 former Apple officers over options [Associated Press in the International Herald Tribune]
Former Apple CFO settles with SEC [Reuters]
Former CFO blames Jobs for backdated options grant [San Jose Mercury News]
Ex-CFO says Jobs was warned of options dates [Market Watch]
Attorney for Fred Anderson Issues Statement Regarding Settlement of Claims with the SEC [Press Release via Business Wire]
Steve Jobs in regulators' sights [ValleyWag]
Former Apple CFO publicly blames Jobs for stock options scandal [Endgadget]
Why Fred Anderson Is Smarter Than Steve Jobs [Business 2.0]
Earlier on DealBreaker: Backdating and Apple stories from the DealBreaker Archives.