Like many companies under the gun in the ongoing stock options trading scandal, Apple is playing a dangerous game with the Securities and Exchange Commission and the U.S. attorney corps. Many companies, which make a similar claim to Apple's that executives involved with back-dating options (or it happened on their watch) did not profit from the practice, took an aggressive course by firing (or accepting resignations) top executives to avoid more severe scrutiny and potential penalties that would make life even more miserable for shareholders. It's the equivalent of settling for a car wreck rather tempting fate, and the U.S. government, with the possibility of a train wreck.
In the latest wrinkle, the Wall Street Journal reports on the most recent filings, which reveal that Apple CEO and savior Steve Jobs recommended the selection of some favorable option grant dates. In an internal investigation, which was led in part by Apple board members Al Gore and Jerome York, Jobs was "absolved" of misconduct, asserting that the incidents were "episodic," "limited" and "isolated." Apple spokesperson Steve Dowling predictably said that the Apple board "expressed complete confidence in Steve and senior management." In other words, Jobs was involved in back dating options but not too much.
The WSJ article quotes New York University finance professor David Yermack:
"They have pretty much admitted that he was directly involved in a fraud," Mr. Yermack said, pointing to Apple's statement that Mr. Jobs "recommended" the selection of favorable grant dates. "If he had directly participated in altering depreciation schedules, or booking revenue that wasn't yet earned, would they have full confidence in him?"
Is the federal government is willing to press the issue surrounding Steve Jobs' involvement, given that an Apple without Steve Jobs takes a huge bite out of the core and shareholder value? Not likely, unless his Pixar days come back to haunt him. The charismatic Steve Jobs is also a cultural icon, the high priest of consumer tech, and this is not an anti-trust issue as in the government vs. Microsoft and Bill Gates. There is the question of what the government considers just and fair remedies, which is not straightforward given there are over a hundred cases, many variations on a theme. Some companies are choosing to avoid the potential train wreck by removing top executives, but Apple has the former almost President of the United States saying Steve's OK.