Apple Computer said in a regulatory filing Friday that it had recognized additional noncash stock-based compensation expense of $84 million and restated its financials by a total of $21 million for the three years ending 2006 as a result of improperly dated stock-option grants.
Investors have been breathlessly awaiting the restatement to learn whether CEO Steve Jobs, who is almost synonymous with the Apple brand, would be implicated in the backdating. The company said its independent review found no misconduct by current management. “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 company said in its filing.
The investigative work performed by Apple’s special committee was applauded by former Vice President Al Gore, who chaired the committee, and Jerome York, the former CFO of IBM, who chairs Apple’s audit and finance committee. The same statement asserted the board’s “complete confidence in Steve Jobs.”
However, the company said the investigation raised “serious concerns” regarding the actions of two former officers in connection with the accounting, recording, and reporting of stock-option grants.
Perhaps the most stunning revelation was Apple’s admission that the approval for an options grant dated October 19, 2001, with an exercise price of $18.3, was “improperly recorded” as occurring at a special board meeting on October 19, 2001. “Such a special Board meeting did not occur,” the company said. However, it stressed that there was no evidence that any current member of management was aware of this irregularity.
On June 29, the company announced that an internal review had discovered irregularities related to the issuance of certain stock-option grants made between 1997 and 2001, including a grant to Jobs. Apple also announced that a special committee of outside directors had been formed and had hired independent counsel to conduct a full investigation of the company’s past stock-option-granting practices.
In October, former company CFO Fred Anderson resigned, saying at the time that “he believes it is in Apple’s best interests.”