Chicago (IL) - As the SEC filed charges last month against Broadcom executives over stock backdating, all eyes are now on Steve Jobs. Although many think Apple's CEO is the next candidate for a SEC-initiated trial, his stature could make the government think twice before initiating ugly legal battle against the American business icon, an article published by Reuters suggests.
We recently reported that the Boston Retirement Board pension fund claimed a new evidence against Jobs and other Apple executives, with revealed records that directly implicate Apple's officials into wasting more than $105 million on the extra value of backdated stock options granted to Steve Jobs. The scandal expanded with the news that Pixar's chief financial officer is facing imminent SEC-initiated legal actions for her role in stock options backdating scandal in times when the animation studio was owned by Steve Jobs. However, Steve Jobs is unlikely to face a government lawsuit over the stock options backdating scandal, according to Reuters.
Pixar and Apple are only two of more than 200 large US enterprises that have come under SEC scrutiny for failing to properly account for backdated stock options. Apple was among the companies that voluntarily disclosed that its backdating practices failed to meet the required corporate accounting. Both Apple's and Pixar's internal audits have cleared Jobs of any wrong doing carried out by subordinates. "In a large company, the financials are very complex and the CEO is not going through line by line to make sure everything is correct," former SEC attorney Phillip Stern told Reuters. "It is not something that would be readily apparent. If the board says everything is OK he has every reason to believe that is fine."
The SEC has also cleared the company. However, the government regulators initiated charges against former Apple CFO Fred Thompson and ex-general counsel Nancy Heinen last year, with a possible lawsuit against former Pixar CFO Ann Mather still hanging in the air. For some, the fact that internal audits cleared Jobs is meaningless. They point out that SEC brought charges this month against Broadcom 's chairman Henry Samueli, despite the fact that the company's internal audits had cleared him. In any case, federal regulators have to prove not only that the company failed to account for backdated stocks properly, but also that an executive was negligent by actually knowing about the backdating issues and not correcting any issues. Broadcom officials were directly awarded the majority of the backdated options, which accounted for $2 billion. Steve Jobs obtained board approval for options grants that he had proposed.
This is a very strong argument in Jobs' favor. Also, the fact that Jobs is no ordinary businessman is not to be taken for granted, according to the Reuters story. It may shield Jobs from potential trial since the government has to take into account the jurors' public opinion. "You cannot discount the fact that Steve Jobs is an immensely well-known and well-respected icon of American business," Anthony Sabino, a law professor at St. John's University in New York, told Reuters. The government wants a clear case with someone of Jobs' stature, a fact that even director of the SEC's San Francisco bureau admits.
For now, it seems the stock backdating options scandal is a matter of balance of power between an American business icon and the government itself. Each side has its arguments with legal teams backing it up, but Jobs appears to have the advantage at the moment. Still, it is difficult to predict the final outcome. The implications of a potential trial would be devastating for Jobs’ otherwise impeccable resume and Apple's public image. The director of the Center for Corporate Governance at the University of Delaware Charles Elson has summed the case it up by saying that "it isn't over until the SEC tells you it's over."
We recently reported that the Boston Retirement Board pension fund claimed a new evidence against Jobs and other Apple executives, with revealed records that directly implicate Apple's officials into wasting more than $105 million on the extra value of backdated stock options granted to Steve Jobs. The scandal expanded with the news that Pixar's chief financial officer is facing imminent SEC-initiated legal actions for her role in stock options backdating scandal in times when the animation studio was owned by Steve Jobs. However, Steve Jobs is unlikely to face a government lawsuit over the stock options backdating scandal, according to Reuters.
Pixar and Apple are only two of more than 200 large US enterprises that have come under SEC scrutiny for failing to properly account for backdated stock options. Apple was among the companies that voluntarily disclosed that its backdating practices failed to meet the required corporate accounting. Both Apple's and Pixar's internal audits have cleared Jobs of any wrong doing carried out by subordinates. "In a large company, the financials are very complex and the CEO is not going through line by line to make sure everything is correct," former SEC attorney Phillip Stern told Reuters. "It is not something that would be readily apparent. If the board says everything is OK he has every reason to believe that is fine."
The SEC has also cleared the company. However, the government regulators initiated charges against former Apple CFO Fred Thompson and ex-general counsel Nancy Heinen last year, with a possible lawsuit against former Pixar CFO Ann Mather still hanging in the air. For some, the fact that internal audits cleared Jobs is meaningless. They point out that SEC brought charges this month against Broadcom 's chairman Henry Samueli, despite the fact that the company's internal audits had cleared him. In any case, federal regulators have to prove not only that the company failed to account for backdated stocks properly, but also that an executive was negligent by actually knowing about the backdating issues and not correcting any issues. Broadcom officials were directly awarded the majority of the backdated options, which accounted for $2 billion. Steve Jobs obtained board approval for options grants that he had proposed.
This is a very strong argument in Jobs' favor. Also, the fact that Jobs is no ordinary businessman is not to be taken for granted, according to the Reuters story. It may shield Jobs from potential trial since the government has to take into account the jurors' public opinion. "You cannot discount the fact that Steve Jobs is an immensely well-known and well-respected icon of American business," Anthony Sabino, a law professor at St. John's University in New York, told Reuters. The government wants a clear case with someone of Jobs' stature, a fact that even director of the SEC's San Francisco bureau admits.
For now, it seems the stock backdating options scandal is a matter of balance of power between an American business icon and the government itself. Each side has its arguments with legal teams backing it up, but Jobs appears to have the advantage at the moment. Still, it is difficult to predict the final outcome. The implications of a potential trial would be devastating for Jobs’ otherwise impeccable resume and Apple's public image. The director of the Center for Corporate Governance at the University of Delaware Charles Elson has summed the case it up by saying that "it isn't over until the SEC tells you it's over."