Jobs to testify in Apple option case
Apple Inc. Chief Executive Steve Jobs has been subpoenaed to testify by the Securities and Exchange Commission in a civil stock option backdating case against Apple’s former chief counsel, according to two people familiar with the case.
The subpoena should not suggest that Jobs is suspected of wrongdoing, according to the people, who asked not to be identified. The subpoena is not a public record.
An Apple spokesman declined to comment. Marc Fagel, the SEC’s associate regional director in San Francisco, said it was routine for the SEC to subpoena witnesses as part of a trial’s discovery phase, but he declined to say whether Jobs had been subpoenaed.
Legal experts said it wasn’t surprising that Jobs would be questioned in the government’s case against Nancy Heinen, Apple’s former chief counsel.
According to the SEC, Jobs was the recipient of one stock grant in question and helped pick the dates in a second grant.
Jobs most likely will face questions from lawyers for both Heinen and the SEC about his knowledge about how stock option dates were picked, including meetings he attended.
The SEC has accused Heinen, who left Apple in 2006, of fraudulently changing the dates of stock option grants to boost their value and instructing an underling to alter company records to hide the action.
Cupertino, Calif.-based Apple admitted last year that the company had improperly backdated stock options over a six-year period starting in 1997. The company took $84 million in charges to correct its accounting.
The company has said that Jobs did nothing wrong because he didn’t understand the accounting laws that applied to backdated stock options.
The SEC said it would no longer investigate Apple, but it has not ruled out continued scrutiny of Jobs.
Companies issue stock options to employees to encourage them to stay and help make the firm a success.
But in the last two years, hundreds of companies have been swept up in stock option backdating scandals when it was learned that firms were looking back for a date when the price was lower to issue stock options. The maneuver was designed to boost the value of the options to recipients.
Backdating itself is not illegal, but hiding it from investors and regulators is.
In August, a federal jury in a criminal case in San Francisco convicted Gregory Reyes, former chief executive of Brocade Communications Systems Inc., for his role in backdating stock options. Reyes will be sentenced Nov. 21 and could face 20 years in prison.
This will not be the first time Jobs has been questioned over how the company issued stock options. As part of the investigation, Jobs voluntarily spoke to government officials in the case last winter.
In April, the SEC sued Heinen and Fred Anderson, the company’s chief financial officer, over their involvement in the company’s stock option backdating.
Anderson settled with the SEC and paid $3.5 million but admitted no illegal conduct.
Lawyers for Heinen, who declined to comment on the Jobs subpoena, have maintained that their client did nothing wrong and that she received the approval of Apple’s board for the timing of every grant in which she was involved.
In a court filing in August, the SEC and Heinen’s lawyers disagreed over the number of witnesses she could call, with Heinen wanting at least 45 and the government wanting to limit her to 12.
What could potentially be interesting about Jobs’ testimony is whether in the deposition he contradicts previous statements he has made about his involvement in the stock option backdating cases or evokes his 5th Amendment right to not answer questions that could potentially incriminate him.
“The potential concern is that he will say something inconsistent to what he has said previously,” said Scott Meyers, a securities lawyer at Levenfeld Pearlstein in Chicago.
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jessica.guynn@latimes.com
