Apple corporation stock option backdating scandal


05-Aug-2017 06:14

A federal appeals court has thrown out the stock option backdating conviction of Gregory Reyes, the former CEO of Silicon Valley network equipment manufacturer Brocade.He was the first person to be criminally prosecuted in the Silicon Valley stock option fraud scandal.(Full deposition embedded below) Jobs explains his reasoning for why he asked the board for mega grants of options for both himself and his top executives, but claims ignorance of the mechanics of how that was done after the board approved the grants themselves. (It was the falsifying of board minutes for a meeting that never occurred, not the backdating per se, that got Apple’s former general counsel Nancy Heinen into hot water with the SEC—this deposition was for a case against her). According to court testimony, Brocade’s failure to expense more than 0 million from backdated options resulted in Brocade reporting profits in 20, when it should have reported large losses.Brocade was just one of many tech companies which came under SEC investigation for distorting their earnings starting in the late 1990s by not disclosing this kind of executive compensation.CUPERTINO, California — October 4, 2006 — Apple® today announced that the special committee of its board of directors has reported its findings after a three month investigation into Apple’s stock option practices.The special committee of outside directors, together with independent counsel and accountants, examined more than 650,000 emails and documents, and conducted interviews with more than 40 current and former employees, directors and advisors.

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The company will provide all details regarding their actions to the SEC."I apologize to Apple's shareholders and employees for these problems, which happened on my watch.

The company and its independent auditors are reviewing the findings of the independent investigation.

Management continues to believe, and the audit committee agrees, that Apple will likely need to restate its historical financial statements to record non-cash charges for compensation expense relating to past stock option grants.

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Reyes was fined million and sentenced to 21 months in federal prison after being found guilty in 2007 of picking favorable dates in the past for the awarding of stock options without revealing that information to shareholders. Circuit Court of Appeals tossed Reyes conviction Tuesday, finding that prosecutors lied to the jury in final arguments, telling them that no one in the Brocade's finance department knew about the backdating.