backtop


Print 30 comment(s) - last by Pirks.. on Jul 3 at 2:27 PM

Group of enraged shareholders file class action for backdating practices which sunk their shares' worth

Angry investors have filed suit against Apple Inc., CEO Steve Jobs, former financial officer Fred D. Anderson, former general counsel Nancy R. Heinen, and several members of the company's board of directors on Friday.  They allege that as a result of Apple's security fraud, they experienced massive losses on the stock market.  They filed their case in U.S. District Court in San Jose, California.

The case is led by plaintiffs Martin Vogel and Kenneth Mahoney, who are seeking class action status.  They stated that the aforementioned plaintiffs and board members William V. Campbell, Millard S. Drexler, Arthur D. Levinson, and Jerome B. York filed false financial statements, concealing millions in executive perks through backdated stock grants.

Apple already acknowledged that such practices did indeed occur.  It said that there were "accounting irregularities" between 1997 and 2001, according to a 2006 report.  It acknowledged that some of the funds in question went to Jobs, but "i
t was subsequently canceled and resulted in no financial gain to the CEO." 

Apple has been subject to numerous government investigations due to its questionable accounting.

After Apple's admission in 2006, the stock price dropped 14 percent, a loss of over $7B USD to shareholders.  The shareholders filing suit hope to regain this money from Apple.

The report in question came in
December 2006.  In it, Apple said that it would be forced to rework its financial results to include an additional non-cash stock-based compensation expense of $84 million after tax [$105 million pretax], including $4 million and $7 million in fiscal years 2006 and 2005, respectively.  However, despite the ongoing irregularities, Apple said it found no irregular grants after Dec. 31, 2002.

The plaintiff's complaint weighs in at a hefty 105-pages.  It basically accuses Apple of knowing what it was doing and intentionally acting in a way that could damage shareholders.  It charges, "
The defendants knew that options were not granted on the dates that were disclosed to shareholders and falsified the company's records to create the appearance of illegality, and thus bear direct responsibility for their actions.  Here, Jobs and the Individual Defendants clearly appreciated the fraudulent nature of their conduct."

Jobs, a controversial figurehead of the tech industry, has received many "instant paper profit[s]" according to the complaint.  The first it says was $20,325,000 when, on Dec. 18, 2001, thanks to 7.5 million Apple shares in a stock option grant dated back to Oct. 19, 2001.  The second was an even bigger 10 million-share option grant in January 2000 resulting in $83,762,000 for Jobs.  The first, it says was not even recorded in Apple's books, while neither were disclosed to shareholders.

Apple would not comment formally on the allegations.

Owen Pell of 
New York law firm White & Case said the case offers up little new in the way of fraud allegations.  Most of the matters in question have already been widely reported.  The case may be a tough one for the plaintiffs, he said, as they must prove that the drop in stock price corresponded to the admission from Apple.

"
Loss causation is not necessarily obvious on the face of the complaint in terms of the plaintiffs adequately pleading the link between the news of Apple's income restatement and the stock drop.  Apple may be able to point readily to other news, either about the company or the market in general, that coincides with market movements," said Mr. Pell.

Mr. Pell added that Apple can elect either to put the suit on hold while pending lawsuits are resolved or more likely apply to have it dismissed.  If the plaintiffs can't offer up sufficient evidence of causation, the case is likely headed to the legal graveyard.

Gary S. Graifman, a partner in the firm of Kantrowitz, Goldhamer & Graifman, P.C. and one of the plaintiff's attorneys, argues that his clients have a very strong case.  He stated, "I think the timing of the drop in the stock and the [Apple] announcements would speak for itself and demonstrate that there is causation."

Pertinent to the case is the
April 2007 filing and simultaneous settlement of U.S. Securities and Exchange Commission charges against former Apple CFO Anderson.  According to the SEC, Mr. Anderson should have noticed Apple general counsel Heinen's fraudulent backdating activity and may have cast a blind eye to it.  Mr. Anderson settled with the SEC, "without admitting or denying the allegations in the commission's complaint," agreeing to pay a $150,000 penalty, agree to an injunction on further security law violations, and to return $3.49M USD in stock options.

Past private efforts to sue Apple for stock options violations have been largely fruitless. 
The New York City Employees Retirement System filed a similar suit, but this May U.S. District Court Jeremy Fogel said that the group could not sue Apple.  He said they couldn't prove that Apple's actions had caused the pension fund harm.  He advised them to join a separate stock-options lawsuit currently in progress.  The results of that suit also remain to be seen.



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

RE: Wondering
By jonmcc33 on 7/2/2008 1:16:58 PM , Rating: 1
I'm just surprised to see a negative Apple blog from Jason Mick. It's unheard of! Maybe he'll address all the bugs that Apple had to patch with OS X 10.5.4 next?

Here, Jason. I will help you out!

http://support.apple.com/kb/HT1994


RE: Wondering
By Pirks on 7/2/08, Rating: -1
RE: Wondering
By SuperFly03 on 7/2/2008 4:26:38 PM , Rating: 4
Get a life.

You are nit picking the command console in Vista? really? Take your Job's worshiping self somewhere into the realm of failure where Crapple products belong.


RE: Wondering
By Pirks on 7/2/08, Rating: -1
RE: Wondering
By Gneisenau on 7/2/2008 4:31:25 PM , Rating: 2
Wow, right off the bat an Apple fanboy appears to defend all things Apple. I don't see where this story took a shot at Apple's OS. It's about a lawsuit against the Corp. Talk about jumping to conclusions..


RE: Wondering
By Pirks on 7/2/08, Rating: 0
RE: Wondering
By mikeyD95125 on 7/2/2008 5:49:23 PM , Rating: 2
The original comment was being critical use Jason Mick's tendency blog about negative Apple stories. And you turned it around like he was being critical of Apple.

You took it totally out of context. Just take your time to read next time instead of jumping to conclusions. You only made yourself look like a jackass.


RE: Wondering
By Pirks on 7/2/2008 6:10:30 PM , Rating: 1
It's jonmcc33 who took it out of context. Ask jonmcc33 why the heck he started to post about some Mac OS fixes here?

I just showed jonmcc33 that he should be bothered more about some serious problems with Windows Vista instead of picking on minor things in a well polished OS from a Microsoft competitor.

Got it? If not - just read this thread from the beginning and you'll understand how totally out of context jonmcc33's post was here.


RE: Wondering
By oab on 7/3/2008 2:04:51 AM , Rating: 2
quote:
Maybe you'd like to discuss Vista bugs instead? Like constant ugly window flickering/slow redrawing when windows are redrawn after you press Win-D twice, _even when Aero is on_?

It's instant for me. Perhaps you have other problems going on. Turning down some visual settings might help. Or updating your drivers to their latest.

quote:
How about braindead non-resizable console window - you still can't change its width on the fly, only the height, why?

You can't, because it starts at the same width as the original DOS terminal, probably to prevent people from screwing up the display and wondering why things look really funny after they "didn't do anything!"

You can still change it in the properties menu. Annoying yes, but it's not a huge problem.

quote:
How about braindead cut-n-paste functionality in console through the pop-up menu instead of direct drag-drop or alt-c/alt-v like in Mac OS?

That's not a bug, you go into "defaults" from the context menu, and choose "quick edit".

Some programs are not compatible with quickedit however (ie. MS Edit doesn't allow mouse access to menus when quickedit is on, but it does if it is off).

XP had the same thing. It's not a bug, it's not a feature, it's a default setting that YOU CAN CHANGE IF YOU WANT TO.


RE: Wondering
By Pirks on 7/3/2008 2:27:24 PM , Rating: 1
quote:
It's instant for me
Was instant for me too until I tried to press F11 in Mac OS X. Everything looks different in comparison. Try to compare Win-D in Vista with F11 in Mac OS X and you will immediately see the difference I was talking about.
quote:
Annoying yes, but it's not a huge problem
My point was that jonmcc33 should be bothered more with those annoying little problems in Vista than picking on much more polished and not annoying Mac OS. Deal with bigger trouble first, pick on minor things later. Got it? ;-)


"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki