Backdating Investigation of Apple ends

From TidBITS
The Wall Street Journal reports that the Justice Department has ended its criminal investigation into whether Apple executives broke the law when they backdated some options without proper accounting and disclosure. Neither Apple nor the Justice Department has made a statement confirming that the investigation is over, but lawyers representing some of those under a cloud told the Journal that they were informed the probe is finished. A civil action by the SEC and private lawsuits are still underway, however.

The SEC looked into Apple's revelation that they had issued stock options to a variety of employees, including Steve Jobs and other executives, that tied the options to a date prior to that on which the options were granted, so called backdating. Stock options are the right, but not the obligation, to purchase stock at a specific price no matter the current price.

By backdating options, a company can assure a windfall to the recipients. Companies may backdate options in many circumstances, but must account for them as a higher expense than merely granting current-dated options, as there's a negative effect on the equity of a firm's shareholders. An academic researcher and The Wall Street Journal blew the lid off this widespread and long-running practice; executives at other firms were indicted, sued by shareholders, fired, or all three. (For more background on backdating, see "Apple Reports on Options Backdating Problems," 2006-10-06.)

The investigation has lasted nearly two years.

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