A two-year Securities & Exchange Commission investigation into allegedly cooked books by Apple Inc. came to a close this week when the company’s General Counsel Nancy Heinen agreed to pay $2.2 million, sparing the electronics giant criminal charges that would have seen court next year.
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A two-year Securities & Exchange Commission investigation into allegedly cooked books by Apple Inc. came to a close this week when the company’s General Counsel Nancy Heinen agreed to pay $2.2 million, sparing the electronics giant criminal charges that would have seen court next year. The SEC stated that Heinen deliberately backdated large option grants – in other words, granting stocks that have been dated prior to its actual compensation date – in order to skim off the top of stock purchase prices, as well as “lying to Apple’s auditors” to cover it up. While backdating itself is not necessarily illegal, Heinen’s improper disclosure to the SEC and allegedly fabricating documents from a board of directors meeting at which certain documents were signed is criminal. The stock option grants included those awarded to CEO Steve Jobs (7.5 million options) in October 2001, and to five Apple execs (including Heinen for 4.8 million options) in January 2001. As a result, Apple’s expenses were under-reported by close to $40 million, according to the SEC.
The settlement includes the $1.6 million Heinen received from the backdating, as well as a $200,000 civil penalty and $400,000 in accrued interest over the last seven years. Due to Heinen’s out-of-court agreement, Jobs himself will save face by dodging an indictment and seeing all potential criminal charges dropped. However, Heinen will be barred from serving as a public company officer or director for five years, and practicing before the SEC for three years.
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