Apple Inc.'s former finance chief warned Chief Executive Officer Steven P. Jobs that the company may need to take a charge for stock options grants, an assertion that might undermine an internal probe that exonerated Jobs.
Former Chief Financial Officer Fred D. Anderson said he told Jobs in January 2001 that Apple would have to account for grants to key executives if they weren't dated to coincide with the board's approval for the awards, according to a statement issued yesterday by Anderson's lawyer, Jerome C. Roth.
The claims implicate Jobs in the company's stock-options scandal and might increase the risk he will face further scrutiny by government lawyers looking into Apple's backdating, said Bill Shope, an analyst at J.P. Morgan Securities Inc.
In December, Jobs was cleared by a special committee led by Apple board member and former Vice President Al Gore, which said Jobs didn't "appreciate" the accounting implications.
"This is the first time any credible witness has claimed that Mr. Jobs was aware of the accounting implications of the backdating," Shope, based in New York, wrote in a report yesterday. "This implicates Mr. Jobs in the scandal in a manner that is inconsistent with Apple's independent investigation results."
Shares of Apple, maker of the iPod music player and Macintosh computers, fell 27 cents to $93.24 in Nasdaq trading. They rose as much as 3.1 percent earlier after the Securities and Exchange Commission said it won't sanction Apple.
"Today, the SEC filed a complaint against two former Apple employees," Apple spokesman Steve Dowling said yesterday. "The SEC did not file any action against Apple or any of its current employees."
Whether the U.S. attorney in San Francisco, which is investigating Apple's options practices, takes action against Jobs will depend on evidence to support Anderson's claims, Shope said. "The burden of proof will need to be very high."
Anderson's disclosure concerns grants dated Jan. 17, 2001, to six members of Jobs' executive team, including Anderson and former general counsel Nancy R. Heinen. The grants weren't given final approval by Apple's board until February 2002, when the shares were trading higher, according to Roth's statement.
Anderson made $3 million in improper profits by exercising the backdated grants, the SEC said in a complaint yesterday.
Anderson agreed to forfeit $3.5 million and pay a $150,000 fine to resolve the agency's lawsuit over his handling of the grants.
Recounting a conversation with Jobs that took place in late January 2001, Anderson said Jobs told him grants to top executives were approved by the board on Jan. 2, when the shares were trading at $14.87, which was the lowest price of the month.
"Fred cautioned Mr. Jobs that the executive team grant would have to be priced based on the date of the actual board agreement or there could be an accounting charge," Roth's statement said. Anderson "relied on" Jobs' assurance that Apple's board would verify that it had approved the Jan. 17 grant earlier that month.
Jobs said the board "would have to confirm its prior approval in a legally satisfactory method," Anderson said.
Anderson concluded that the grant was being handled properly, the statement said.
Apple's board didn't authorize the executive grants on Jan. 2, said Marc J. Fagel, an SEC enforcement attorney.
"The bottom line is that regardless of what he says about Jobs, he had information in front of him that should have led him to take additional steps to make sure the company's financial statements were accurate, and he failed to do that," Fagel said in a telephone interview.
Heinen, who was sued for fraud by the SEC yesterday for her role in Apple's backdating, allegedly told Anderson on Feb. 1, 2001, that Jobs agreed to date the executive grants Jan. 17, when shares traded at $16.81, and the board approved the grants in early February, the complaint said.
The SEC said it won't sanction Apple for backdating almost 6,500 grants, including one to Jobs, because the company cooperated with the regulatory probe.