Apple Finds 'Cause for Concern' in Options Backdating Probe

Apple (Nasdaq: AAPL) is likely to join the 100-plus companies under investigation by the U.S. Securities and Exchange Commission for backdating stock options. The company has reported the results of an internal investigation it launched a few months ago, finding there is "cause for concern" that regulations were violated.

Stock option grants were changed on at least 15 dates in order to increase their value, Apple said.

The brewing scandal has touched CEO Steve Jobs, who apologized to shareholders, acknowledging that he knew some stock options had been backdated.

The investigation uncovered actions by two former officers that also were cited as causes for concern. Former CFO Fred Anderson resigned from the company's board of directors, apparently as a result of the probe. He told reporters he resigned because it was in "Apple's best interest."

Next Steps

It is unclear what the long term fallout will be for Apple, which until now has maintained a relatively pristine reputation. The SEC's investigations into companies that allowed executives to backdate options are still in the early stages -- the result of an academic study released this spring that found that grant dates of options often coincided with the day that happened to register the lowest price of the company's stock for the period.

Following that report, the SEC started looking at a number of companies, and companies started looking at themselves.

At present, Apple's liability on this issue is strictly a civil matter, said William Mateja of the Dallas and Washington, D.C., offices of Fish & Richardson. "[Apple] will turn the results of the investigation over to the SEC," he told MacNewsWorld. "I have no doubt, though, that if the [internal] investigation found there were serious concerns, the SEC will investigate."

If the matter were to become a criminal issue, it would be referred to San Francisco-based U.S. Attorney Kevin Ryan, who also happens to head the Justice Department's task force on backdating, Mateja said. There are reports that Apple is already under government investigation.

Not a Positive Sign

Indeed, the report does not bode well for Apple, Mateja said.

"Companies are liable for the actions of their employees," he pointed out.

Also, there could well be fallout for Jobs himself. "If he knew what was going on -- even if he didn't benefit from it himself -- he could potentially have individual liability," Mateja speculated.