Ex-Apple Lawyer Hires Own Counsel
The former general counsel of Apple Computer Inc. has retained two criminal defense lawyers amid an investigation into the company’s timing of stock option grants.
Nancy R. Heinen left the company in May, after nearly a decade running its legal department. Apple offered no explanation for her departure Thursday, and Heinen did not return a phone call seeking comment.
A lawyer who has sued Apple on behalf of shareholders characterized Heinen’s departure -- along with those of several other high-ranking executives this year -- as “not simply coincidental.” But other legal experts said it was not unusual for executives at companies under scrutiny to hire legal representation as a defensive move.
Cristina Arguedas, who has represented a former Enron Corp. trader as well as sprinter Jim Montgomery, who testified in the BALCO steroid scandal, confirmed that she had been hired by Heinen. Arguedas said neither she nor her client had been contacted by federal or state investigators examining whether tech companies manipulated the timing of options grants to ensure big payoffs for employees and directors.
“No inference should be drawn [from the fact] that I represent her, except for the fact that every intelligent officer, director, executive or general counsel of any Silicon Valley company that is currently in the process of having an internal investigation -- if they’re smart, they’re going to make sure they have counsel,” Arguedas said.
Miles Ehrlich, a former head of the white-collar crime section of the U.S. attorney’s office in San Francisco, said he was also representing Heinen.
Apple disclosed in June that an independent counsel appointed by outside directors was examining option grants made from 1997 through 2001. In a separate filing with the Securities and Exchange Commission, Apple said that its financial statements for fiscal years 2003, 2004 and 2005, and the two most recent quarters, “should no longer be relied upon.”
Heinen’s exit followed recent departures of other high-level executives who, like Heinen, had worked closely with Apple co-founder and Chief Executive Steve Jobs for many years.
Former head of software development Avie Tevanian left the company March 31, and Senior Vice President Jon Rubinstein, who oversaw the iPod division, retired the same day.
On July 24, San Diego law firm Lerach Coughlin Stoia Geller Rudman & Robbins sued Jobs, Tevanian, Rubenstein and 13 other Apple executives and corporate directors. The suit, filed in U.S. District Court in San Francisco, alleges that senior Apple executives diverted to themselves hundreds of millions of dollars of corporate assets via the manipulation of option grants since 1994.
“There are some very important people involved in Apple who oversaw the operations of that company at a time when it appears it engaged in some very serious wrongdoing,” said lawyer Darren Robbins of Lerach Coughlin.
“Usually, the fall guy -- the initial fall guy -- is not the senior-most member of management or the board of directors,” Robbins added.
Apple did not return calls seeking comment Thursday.
The alleged irregularities occurred before the 2002 passage of the Sarbanes-Oxley law, which requires companies to report option grants within two days, said Jesse M. Fried, a professor at UC Berkeley law school.
“My sense is that these forms of manipulation -- the backdating, ‘spring loading’ and then delaying option grant dates until bad news has been released -- these practices have been pervasive” in Silicon Valley, Fried said. “What we’ve seen is just the tip of the iceberg.”
Lawyers who work with corporations say Heinen’s decision to get legal assistance is a defensive move that anyone in her position would make. As Apple’s general counsel and corporate secretary, she may have signed off on documents involving option grants or participated in the recording of executive compensation.
“This person may have been involved with the documentation in how stock options were being granted,” said lawyer Mark Conley, a partner at Katten Muchin Rosenman in Los Angeles. “Their conduct could be implicated in what the investigation turns up.”
