While Apple today has to fight allegations of anti-competitive behavior and is probably facing further cuts in many countries, a very threatening phase began 20 years ago. It started with a somewhat dramatic-sounding report from Apple to the Securities and Exchange Commission (SEC). It said: Between 1997 and 2001 there were irregularities in the issuance of stock options. The investigations that have been initiated are now being carried out by board members who are not active in Apple management. They are reviewing the awarding of stock options to Apple’s executives; there were also irregularities with then-CEO Steve Jobs. Not isolated cases, but systematic falsification
However, Apple’s own investigations didn’t stop there, because it turned out that there was manipulation on a large scale. Apple had regularly and systematically backdated stock options in order to enable the beneficiaries to make excessive profits. The tricky question was how much Steve Jobs knew about the whole affair. Market observers were certain that he knew exactly what was going on – but was Apple able to credibly convey the opposite to the SEC investigators?
CEO exit would have been threatening back then
The stock scandal came at a time when Steve Jobs was still indispensable to the company. If the CEO had been proven to have knowledge of the matter and its implications, it would have been threatening for the company, which was just emerging again. Things got really dicey when former CFO Fred Anderson made serious allegations against Jobs during a hearing. He not only knew about the events, but personally ordered them and took part in intensive discussions.
Protecting Steve Jobs was a priority
Apple’s line of defense, however, was that Jobs had basic knowledge, but had neither personally enriched himself nor been able to understand the legal implications. In addition, his option package was canceled in 2003, meaning it was not used at all. The investigation by the SEC and the Justice Department lasted more than two years and included various subpoenas to Jobs and other Apple managers.
Anderson and Heinen pay millions, Jobs remains unencumbered
Things ended happily for Apple and Jobs. Things looked different for ex-CFO Anderson and former senior attorney Nancy Heinen. Both were asked to pay several million dollars and reached a settlement – while Steve Jobs emerged from the proceedings unincriminated. However, quite a few described Anderson and Heinen as a kind of pawn sacrifice to protect their own CEO.
Apple did everything it could to portray those people as being primarily responsible so that current staff were not forced to leave. Although the settlement did not include an admission of guilt, the names obviously remain badly damaged. In July 2008, the Justice Department closed the main proceedings, and in September Apple settled all other pending lawsuits.
