The Securities and Exchange Commission is this week expected to file civil fraud charges against Apple’s former top lawyer about stock options backdating. The decision would be the first legal action in a case that raises questions about the role played in improper options-granting practices by Steve Jobs, Apple’s chief executive.
The SEC is expected to claim that Nancy Heinen, who resigned as Apple’s general counsel last year, engaged in a scheme to defraud investors by changing grant dates of stock options to inflate value, people familiar with the matter said yesterday.
Lawyers for Ms Heinen said she would fight any charges.
“Nancy did not participate in moving grant dates back in time or to a lower price,” said Cristina Arguedas, one of Ms Heinen’s attorneys. “We think we have a very strong defence and we are fighting the case.”
Apple is the highest-profile company to have been caught up in the scandal about options backdating, a practice where the grant dates of stock options are changed with hindsight to inflate their value. More than 200 companies have come under scrutiny in regard to the practice. Dozens of senior executives have been forced to resign. Several have faced civil or criminal charges. The SEC is locked in an internal debate about whether to charge companies over the practice.
Questions about Mr Jobs’s role in backdating at Apple have been posed since June, when Apple declared it had found “irregularities” in timing of options grants, including one grant to Mr Jobs.
In October, Apple said an investigation cleared Mr Jobs of any wrongdoing. The investigation uncovered “serious concerns regarding two former officers in connection with the accounting, recording and reporting of stock option grants”. Those two are believed to be Ms Heinen and Fred Anderson, former chief financial officer. Mr Anderson could not be reached to comment.
It emerged in December Mr Jobs had personally recommended some instances of backdating. Apple said Mr Jobs had recommended favourable grant dates, but did not benefit and was unaware of the implications.
The case against Ms Heinen is expected to concern a grant of 7.5m options to Mr Jobs in December 2001 and a January 2001 grant to several executives. The second grant, approved by Mr Jobs, resulted in 400,000 stock options to Ms Heinen, a person familiar with the matter said.