Apple Apologises Over Stock Option Snafu

by Glen Shapiro, LawAndTax-News.com, New York

06 October 2006

Apple announced on Wednesday that the special committee of its board of directors has reported its findings after a three month investigation into Apple’s stock option practices.

The special committee of outside directors, together with independent counsel and accountants, examined more than 650,000 emails and documents, and conducted interviews with more than 40 current and former employees, directors and advisors. Apple initiated this investigation after a management review discovered irregularities in past stock option grants.

The investigation's key findings were that:

• No misconduct by any member of Apple's current management team was found.
• The most recent evidence of irregularities relates to a January 2002 grant.
• Stock option grants made on 15 dates between 1997 and 2002 appear to have grant dates that precede the approval of those grants.
• In a few instances, Apple CEO Steve Jobs was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications.
• The investigation raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants. The company will provide all details regarding their actions to the SEC.

"I apologize to Apple's shareholders and employees for these problems, which happened on my watch. They are completely out of character for Apple," Mr Jobs announced on Wednesday. He continued:

"We will now work to resolve the remaining issues as quickly as possible and to put the proper remedial measures in place to ensure that this never happens again."

The company also announced that Fred Anderson, Apple’s former CFO, has resigned from its board of directors. Mr. Anderson, who served as CFO from 1996 until 2004, informed the company that he believes it is in Apple’s best interests that he resign from the board at this time.

Following the announcement earlier this year of irregularities related to the issuance of the stock option grants in question, it emerged that the company was facing 'derivative' lawsuits, which are filed by shareholders claiming to act on the company's behalf.

The suits made claims against current and former officers and directors with respect to the company's awarding of stock option grants.

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