Ex-Apple CFO 'to settle options claims'
Ex-Apple Inc Chief Financial Officer Fred Anderson will pay $3.5 million to settle US claims over backdated stock option grants approved by Chief Executive Officer Steven Jobs, a person familiar with the case said, making Anderson the highest profile finance chief ensnared in the probe.
Anderson, 62, Apple's CFO from 1996 to 2004, will also pay a $150,000 fine to settle the Securities and Exchange Commission allegations that he filed false financial reports and had inadequate accounting controls at the Cupertino, California-based company, the person said. The grants, to Jobs' executive team, were approved by the CEO and Apple's board in February 2001, and backdated to January 17, boosting their value, the person said.
The settlement involving a former officer of Apple, maker of Macintosh computers and the iPod music player, escalates the federal backdating probe. More than 200 companies have disclosed internal or federal investigations into how options were awarded. Because of their role in preparing financial reports and ensuring compliance with accounting rules, CFOs are in the line of fire.
Anderson's settlement, to be filed in federal court in San Jose, is the government's first case in an investigation of Apple's stock options practices. Lawyers for Apple's former General Counsel Nancy Heinen said she is likely to be sued this week for allegedly backdating an October 19, 2001, stock option grant to Jobs for 7.5 million shares, and the earlier grant to Jobs' executive team members.
Heinen, 50, resigned in May 2006 without explanation, two months before Apple disclosed its probe into backdating.
The SEC settlement doesn't involve the options grant to Jobs, the person said. Anderson, a director at Ebay Inc and Move Inc, didn't admit or deny any wrongdoing and isn't barred under the settlement from serving as a director or officer, according to the person.
Anderson, now a managing partner at Menlo Park, California-based Elevation Partners LP, a private equity firm he co-founded in 2004, has been under scrutiny since October by regulators looking into options backdating at Apple, the person said.
Backdating
The backdating occurred while Anderson was CFO. Jerome Roth, Anderson's attorney, didn't return a message left after hours seeking comment on the settlement.
Apple said in December that Jobs recommended some favorable dates on options other than his own. The company didn't specify which grants he chose the dates for. Apple said it recorded $84 million in charges to correct accounting for the backdated grants.
Apple said on December 29 that 6,428 stock options issued between 1997 and 2002 were backdated. That included one grant to Jobs marked as approved at a special board meeting that never occurred. Apple found "no misconduct" by the CEO.
The US Attorney's office in San Francisco has said it is investigating options practices at the company.
Stock options allow holders to buy shares at a later date, usually at the trading price on the day they were granted. Through backdating, companies grant options on days with lower stock prices. That gives recipients a built-in profit. Unless disclosed and recorded as an expense, the practice hides costs from shareholders and regulators.
In December, Apple said the actions of two unnamed officials involved in accounting, reporting and recording of stock options grants raised "serious concerns". One of those officials was Anderson, the person said. Regulatory filings show Anderson earned at least $10 million by exercising stock grants with favorable dates. Apple hasn't said if Anderson was involved in dating options.
Steve Dowling, an Apple spokesman, and Marc Fagel, associate district administrator for the SEC in San Francisco, declined to comment.
In 2004 Anderson retired as Apple's CFO and was named by Jobs to Apple's board. Anderson stepped down from the board in October.
Bloomberg News
(China Daily 04/25/2007 page16)
