Saturday, December 30, 2006

Apple Computer's Stock Options Back Dating Scandal: An Ex-felon's View

The pursuit of criminal conduct in America should not be affected by the ideology and prejudices of those seeking justice and the persons being pursued. The pursuit of Justice must be blind.

Steve Jobs and individuals at Apple Computer must face the same amount of scrutiny as those involved in Enron and other major corporate frauds.

The disclosures in Apple's report are very troubling and require an appropriate investigation by the SEC and US Attorney for possible criminal conduct.

Steve Jobs should welcome such an inquiry if he is in fact not guilty of any misconduct. Mr. Jobs himself must also provide the public with a forthright, reasonable, and transparent explanation without any spin if he is to have any integrity.

I above is a response I wrote to Professor Larry E. Ribstein regarding a commentary he posted on his Ideoblog entitled “The Backdating Zealots’ Apple Problem.” In his commentary he wrote in part:

Just to summarize the emerging blackletter law: It's ok to commit “fraud” (which is what we are repeatedly told backdating is) if (1) you are a media darling who produces fancy products that everybody loves; (2) you can get Al Gore to sign off (I guess this particular truth isn't too inconvenient); and (3) you can get somebody else in your company to do the dirty work.

I am troubled by Steve Jobs picking what I see as a political ally to oversee Apple Computer’s internal investigation. Mr. Jobs has contributed large sums of money to the Democratic Party and its candidates.

I read Apple Computer’s recent 10-K report filed with the Securities and Exchange Commission. Apple Computer’s report said that were 6,428 back dated option grants on 42 separate dates over a five year period it concluded that there was no misconduct by current management.

The report said the following about Steve Jobs and certain individuals who had worked at Apple Computer:

Although the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications. The Special Committee also found that the investigation had raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants.

The New York Times in an article entitled “Apple Panel on Options Backs Chief” written by John Markoff and Eric Dash on December 29, 2006 wrote the following:

It appears as if Jobs is playing the role of a monkey: See no evil, hear no evil, speak no evil,” said Lynn E. Turner, a former chief accountant at the Securities and Exchange Commission. “If he truly were fulfilling his role as C.E.O., it is highly questionable as to why he didn’t know about such poor management and oversight of the option granting process.

I am very troubled about this too.

In a previous commentary on this blog entitled “The Art of Spinning: How to Identify Possible White Collar Criminals or at least Unethical and Deceitful People You Should Avoid” I wrote:

When you cannot dispute the underlying facts, accept them as true but rationalize your actions. You are allowed to make mistakes as long as you have no wrongful intent. Being stupid is not a crime.

While I hope this is not that the case with Steve Jobs there are compelling reasons for the Securities and Exchange Commission and the United States Justice Department to pursue a vigorous investigation of the actions of individuals at Apple Computer.

If Steve Jobs and others in current management have done nothing wrong, they should welcome it. They must cooperate in a transparent way with any investigation.


Sam E. Antar (former Crazy Eddie CFO & ex-felon)

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