Apple trying to avoid a train wreck

Apple trying to avoid a train wreck

Summary: 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.


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. 

Topic: Apple

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  • Makes You Wonder

    Al Gore, running around the world telling everyone how we're all doomed to an environmental holocaust and when you read between the lines it is because of the Bush Administration's links to oil companies. Yet, the very same Al Gore who can form such compelling arguments has managed to tie his name to an internal report at Apple that basically says, "Yeah, Steve Job was involved in the dating of options, but really it wasn't a big deal." Turns out he broke the law and it is a big deal. Sure, we're all not going to suffer runaway greenhouse effect because of it, but its hard to insinuate dirty business connections against the President while collecting healthy director's fees from a company and effectively giving the CEO a pass when he's dipped his hand in the shareholders pockets for his senior management colleagues.

    You either live on the moral highground or hurt yourself falling off of it.
    • Big bad vs little bad...

      Say I agree wth all your accusations (which I don't) and grant you all said points.
      There is a world of difference between killing an entire planet and dipping one's
      hand in the cookie jar. Again assuming that I grant you all points and except that
      prremiss that Steve Jobs is completely guilty (which I don't) then this guy collects
      what a $1 salary and only gets recomensed by stock options and or grants? I'm a
      share holder and my stock was like $12.00 when Steve took's now what?
      PLEASE. Again I don't agree with you stlant on Steve's guilt could be that
      he was not aware of all the accounting or legal implications and to him it was just
      another day and a casual off hand decision made of many that particular day.

      Pagan jim
      • Big bad?

        Killing an entire planet? There is yet to be a single casualty due to supposed "global warming"! Where I live, we could use a little global warming in winter...freezing to death is literally a threat, vs. this fuzzy science that is not even substantiated yet. There is a real and legitimate divide among scientists over weather global warming even exists, or whether what we *think* we're experiencing are normal *cycles* in climate.

        Anyway...back to the point - you put faith in someone like Al Gore, that's what you get: a dichotomy of morals. It just depends on what happens to suit him. If I were Apple, I could find quite a few people better suited for the board than Al.
        • Real science vs science lite...or fuzzy science.

          I don't think amoungst real scientists in the given field of climate there is much
          dispute....perhaps on when and how bad maybe.

          I use to work for a guy who called himself Dr before his name and granted he did
          have his doctorate but it was in Oceanography not in computer science and that
          was the buisness he ran. Nope he never pointed that out to his clients either. It's
          easy to claim something is based in science or scientific methods but often if you
          scratch just below the BS you find it's not so much.

          Now as for Gore....who says I put any faith in Gore? I put my faith in observations
          of my own and science as a general rule of thumb but not people even thouse on
          a given subject I might agree with. Turns out there a many a subject that Gore
          and I do not agree on. Take gun control for instance. I don't put my faith in GW
          Shrub either but that should be obvious to all except the demented who still think
          God put GW Shrub into office. So let me get this straight there are people out
          there who think so little of God and her judgement that she would install GW
          Shrub into office? What does God have against the United States anyway?

          Pagan jim
          • Well, first...

            Oceanography is a science. Biological science is just as 'scientific' as computer science or nuclear science.

            Second, global warming is happening on a global scale and most legitimate scientists agree. It is only corporations and government (and shareholders) who disagree.

            For those who disagree with global warming, please, tell that to the Polar Bears who are drowning and starving because the ice is melting 4 months sooner that it used to.
          • Oh I agree it is a science.

            My point was that "IF" you don't tell people where your degree comes from you can
            by default claim expertese in fields you know little to nothing about like my former
            boss man.

            Pagan jim
      • Big Bad vs. Little Bad ? No such thing!

        There is no such thing as a little bad or a big bad. If you break the law, you break the law. If you have no morals, then you don't have any morals. In current society we have lost sight of the fact that things are cut and dry, if you commit a sin, it does not matter what your opinion of the severty of that sin is, it is still a sin! If Steve Jobs did wrong, then he should be punished, and that is it.
        • Strongly disagree.....

          Jay walking is not as bad as murder. Bank robbery is not as bad as rape. Killing
          of an entire planetary ecosystem is not as bad as what ever Jobs is NOT accused of
          as of yet. Since Jobs is not even charged with anything then it's hardly correct to
          accuse him of sin. Also I very much doubt based on your words that we would
          agree on the concept of "sin" but again I disagree on the premise that stealing
          (some might claim to be a sin me I'm flexible cause if you need to eat stealing is
          OK by me) and murder almost universally agreed upon to be a sin (unless self
          defense in involved that is)

          Nor do I care one wit what you personal god image claims...peshaw I say.

          Pagan jim
      • not aware of all the accounting ??

        You must be joking? Since when was ignorance ever considered an acceptable excuse? Was it acceptable for Bernie Ebbers? The CEO is supposed to know about the accounting and legal implications of his actions and that of his company - he does have to sign off on the financial statements. If not - he should have a whole host of lawyers and accountants with whom he can ask for counsel.

        You can bet Apple's auditors are chugging the malox over this.
        • Tell me does Steve Jobs strike you at anytime in his

          life as the bean counter type? Does any of his talents play to that area of buisness?
          Why does one have accountants and other lackeys of one is capable of doing it all?
          Steve Jobs is a ptichman and perhaps a visionairy with a perfectionist zeal but I can't
          see him giving much thought to spread sheets. I still say it is likely he casually
          without much thought said sure this sounds good and left it to his lackeys to work
          out the detials. Perhaps he was told it would be fine and he trusted that as a check
          and balance.

          Pagan jim
          • He only plays one in ads?

            He's responsible! That's his job. Only a sociopath says "Sure it's my job to be responsible but this was someone else's fault." SOX legislation is quite clear about people in charge actually taking responsibility for their companies.
          • Yadda...yadda...yadda.

            All I care about is that under Jobs my 12 dollar stock split and is currently selling for
            90 or better. I don't think Jobs has been accused of anything illegal and or criminal
            activity by anyone but people here and other so called none experts. While I have
            read that at least some exptets think Jobs has little to nothing to be concerned
            about. So until proven otherwise I'll go with that opinion and hope for the best for
            my precious stock.

            Pagan jim
          • oh come on

            you know full well that $teve Job$ is an evil thug and should be thrown in a maximum security prison where he'll hopefully suffer the same fate as Apple'$ cu$tomers, if you know what i mean, wink wink.
            He and his merry band of thugs have used the FUD too long for profit (F***** the Upperclass Dimwits). Although the mentality of the average apple user compares to a Denny's dinner salad, they should not have to take this level of abuse from these criminals.
            He should be immediately hauled away, or Crapple $hould throw $teve misrepresentation Job$ out on his grand A$$.

          • It doesn't matter what he strikes me as...

            it's required by law.

            He is the CEO and is required to sign off on the financial statements attesting to the accuracy of financial reporting and the disclosure of any fraudulent activity. It's also something called "tone at the top". If the CEO and CFO (which is scariest of all) are involved in questionable activities, it casts a shadow on the entire company. As an auditor - we get extremely nervous about this kind of thing and I've seen executives get forced out over less.

            Bernie Ebbers tried the "aww shucks" defense saying he didn't know any better and he's going to jail for it. I'm not saying that Jobs is an Ebbers...but ignorance is not a defense.
          • We shall see.....I'm betting no.

            THere seems to be a lot of assumtion by many that someething criminal has
            happened and yet I've heard many others say no. So if I had to bet I'd go with
            no..either there will be no conviction because nothing criminal happend or it's too
            hard to prove and or Jobs is soooo important to Apple and her present course that
            others will gladly fall on their swords to protect him. Either case I'm good with it.

            Pagan jim
    • What I can't believe

      Is that Al Gore sits on Apple's board. Talk about the lack of "cool". That is as UNCOOL as it gets. Bill Gates looks like a guitar hero compared to Al Gore.
  • The role of the SEC

    Is to protect stockholders (the general public and overall health of the market).
    Something like the removal of Jobs would be extremely detrimental to Apple
    stockholders since Jobs is so closely tied to the success of the company since his
    return to the company. It gets even more complicated when you look at the overall
    health of the computer industry because Apple is looked at as the innovator and
    the only competitor to the Windows desktop monopoly. The foregoing would
    present interesting problems for the SEC. My guess is that they would tread very

    The reliance on the Jobs persona is a problem for Apple in the future no matter
    any SEC actions, since nobody lives forever nor can anybody guarantee their own
    good health. Microsoft faces a similar problem with the Gates and Balmer
  • What is so bad about this

    To be honest, do we really need to care that much? I certainly don't!
  • Just another OJ

    Break the law and get away with it...same old story.
    Money talks, that is the bottom line.

    Would not expect any other response than the one Al Gore gave, just corruption as think the millions he has made on his phantom hole in the ozone would have been enough....guess not.
    • You are making assumptions....

      First that a law has been brocken.....I have yet to hear of a trial and conviction nor a
      claim by any that a law was indeed brocken.

      What do you mean by phantom hole in the ozone and Gore making milliions off said?

      Pagan jim