Apple Takes Options Charge, Backs Jobs in SEC Filing

The report came at the end of a wild holiday week for Apple, as the company rode a roller coaster driven by a barrage of reports suggesting the stock options scandal could implicate and taint Jobs, high stakes for a company that relies on its CEO as its public face like few others do.

On Tuesday, a report said he had hired a personal attorney to work on the options case. A day later, the Financial Times of London reported that a key stock option grant to Jobs had been issued without board authorization and that documents suggesting the board had voted had been altered.

In its filing with the SEC, Apple acknowledged that was, in fact, the case.

Apple said the October 2001 grant of 7.5 million shares to Jobs came on a date when no board meeting took place. "The approval for the grant was improperly recorded as occurring at a special Board meeting on Oct. 19, 2001. Such a special Board meeting did not occur," Apple said. "There was no evidence, however, that any current member of management was aware of this irregularity."

Apple said its revised filing recognizes $20 million in charges for that options grant alone.

1 Million Documents

Apple shares rose nearly 5 percent in Friday trading to $84.74, reflecting investor optimism that the options issues would be behind Apple as it focused on new product rollouts and other initiatives heading into 2007.

The SEC is known to have launched its own inquiry into the stock options situation and reports have suggested that federal prosecutors may be investigating, as well.

Apple said it has turned over the results of its internal inquiry to all investigative bodies, including the SEC and the U.S. Attorney's office.

In its filing, Apple said its own investigation reviewed thousands of stock options grants and found that the "originally assigned grant dates for 6,428 grants on 42 dates are not the proper measurement dates."

The total additional expense from that difference amounts to $105 million before taxes and $84 million after taxes. Apple noted that some 35,649 grants did not require any adjustment.

Apple said a team of forensic accountants spent 26,500 hours reviewing some 1 million "physical and electronic documents and interviewing more than 40 current and former directors, officers, employees, and advisors" to arrive at its conclusions.

"Based on a review of the totality of evidence and the applicable law, the Special Committee found no misconduct by current management," Apple said. That committee was headed by former Vice President Al Gore.

Apple is one of many companies caught up in the options backdating fallout. Other companies have had CEOs resign and have been forced to take tens of millions of dollars in new charges to make up the difference between the stock prices on the falsified stock grant dates and the price on the dates the stock was truly given on.