Ignorance can be bliss, but it’s not a tight defense, lawyers say. When Apple disclosed Wednesday its internal investigation had uncovered some stock-option backdating, the company said Jobs was aware of the practice but unaware of its accounting implications. The probe also did not find any misconduct by Jobs or other current officers, the company said. In a blend of semantics and general legal analysis, however, securities experts say Jobs could still face some kind of penalty over the situation.
1) Backdating was not illegal back then (afaik it’s not really illegal even now anyway, just impractical). What is/was illegal (and even that is rather murky) is improperly accounting for these options.
2) “ignorance of the law is not a defense” — indeed. But here, there was nothing illegal, so… Jobs knowing about some of the backdated options isn’t, in itself, a problem.
The thing is, “ethically” you can argue that option backdating is wrong, why not; but legally there wasn’t any problem, as long as they were accounted properly. The real “option scandal” is about companies that willingfully forged options documents — much worse. But that’s not what most of the companies in this “scandal” did, and it’s apparently not what Apple did.
We seem here to have a media frenzy about nothing. While you could argue that backdating is morally wrong, it was just, at the time, another kind of compensation that a company used to reward employees, and was used as such, which explains the widespread use.
In most of the cases where they were “improperly accounted”, it even seems it was more honnest mistakes than anything else — as the law wasn’t exactly clear on how to account them.
Frankly, all that is pure FUD — specifically regarding Apple, with people “speculating” (in the first sense of the word) on Steve Jobs beeing thrown in jail (like there’s any chance that will happen — with options beeing awarded by a separate commitee, and events happening anyway before sarbanes-oxley), or about “restatements could dramatically reduce some of the windfall generated during the company’s recent run of record profit” — yay right, we’re talking about a few millions vs the $3.1 billions profits Apple earned in the last four years, but oh sure it’s “dramatic”. All that stinks of market manipulation before the earning period.
I think the media is after another “Enron” headline for a major company… and most companies really don’t try to lie about their finances. It’s a pretty rare thing.
The issue is strictly accounting techinicalities. Until about 1999 there was no SEC instructions at all for how to handle “backdating” it was going on all the time. After that, they handed down some rules for accounting to follow, but until very recently they haven’t even been following up on them… the SEC is trying to “look busy” after ignoring/missing the huge stock scandles of a few years ago. This isn’t really close to a criminal issue, it’s a book keeping issue… there’s not even talk of any fines at this point. Apple just has to redo their profit numbers to take into account the correct accounting method for the options. It WILL force them to take back profit numbers from the last few years, and probably “lose” some paper profit this year to “pay back” other years.
Remember, Apple is the one announcing this, the SEC ASKED them to investigate and they did. Apple has willingly compiled with the SEC’s questions.. so there shouldn’t be any criminal issues here. The CFO stepped down because he SHOULD have been on top of this before the SEC called Jobs… But again, that’s not criminal, but the company will have to pay up to fix it. That hurts the stock because moron newspapers fill the regular joe investor with FUD about what’s going on.
Jobs isn’t going to jail; in fact, he will never be charged with anything over this whole matter. It’s an accounting problem, nothing further.
There must be an actus reus accompanied mens rea to constitute the crime with which the defendant is charged
the prosecutor will obviouly argue willful blindness though :-p
Isn’t it both Mens Rea and Actus Reas in a criminal procedure but only actus in a civil procedure?
Jobs’s Role
Jobs, who co-founded Apple in 1976 and returned to run the company nine years ago, was aware that favorable grant dates had been selected in “a few instances.” He didn’t receive or otherwise benefit from the grants, Apple said. He also didn’t understand the accounting implications.
“For Steve Jobs to assert that he deferred to qualified lawyers and accountants on the rules governing the issuance of options is entirely reasonable,” said Jacob Frenkel, a former SEC lawyer now in private practice at Shulman, Rogers, Gandal, Pordy & Ecker in Rockville, Maryland. “I don’t think you would expect him to know the rules.”
http://www.bloomberg.com/apps/news?pid=20601103&sid=ahRWm07Xylss&re…
Let’s wait for results from the investigation into Microsoft stock irregularities
http://www.p2pnet.net/story/10036
. . and then expel both companies to China or even North Korea, or in worst case to Russia, or even France (gulp)
My sincere apologises for how lightly and carelessly I comment on these grave grave matters :/
Legislation is not a mass production . .
.
“. . and then expel both companies to China or even North Korea, or in worst case to Russia, or even France (gulp) ”
PSSSt :
Apple and Microsft already are in China , North Korea , Russia and France.
You can now start to freak out … you racist idiot.
I rather doubt that MS is in North Korea. Certainly Russia and China. But not North Korea. Their software is not allowed by US law to be sold there.
While I can understand Jobs didn’t understand the accounting implications, it is his job as CEO or whatever to understand them.
Ignorance of the rules/law is not an excuse. Hopefully his laisse faire attitude won’t get him in trouble.
But if this were some other Joe Bloe company, SEC would eat us for breakfast.
While I can understand Jobs didn’t understand the accounting implications, it is his job as CEO or whatever to understand them.
As I said, back then, the rules were rather unclear — quite a gray area (we are not talking about document falsification, but improper accounting). It was also common practice, and the law firm (whose name escape me right now) implicated in a lot of these cases apparently advised that it was legal. Looks they were wrong, but you can see it was borderline.
As captain of a ship, you are obligated to take responsibility for the actions of your crew. That is even although you cannot possibly be in all places at once. The point is, you set guidelines, and those guidelines should be about correct conduct. If, as captain of his ship, Jobs had a crew that were doing things which were clearly INCORRECT, he should answer for it.
As captain of industry you can’t allways be on top of things so to speek.Though you are still responsible when something happens out of your direct reach and you *have* to make a statement by resigning.
about Apple and their shareholders posted in the comment section of some Apple news over at Neowin.net
Cupertino, start your shredders.
It made me smile.
i get it… i get it….. its a play on “Redmond start your copiers” WOW…that was a total knee slapper! OMG…. i selling my stock in AAPL… and ebaying my Mac Fleet! apple is doomed… and jobs is going to prision…. oh… the humanity!!!!!!!!!
you windows guys we right all along! you all must have been clairvoyant!
can some one out there have pitty on me and show me how to use the start menu, on this new Dell i just bought…. and whats up with all these buttons and the wheel thing on the mouse? i am so confused!
geez, man… it was a pretty funny joke. It’s not like he kicked your dog or even *god forbid* insulted your mac.
Awww, looks like ronaldst touched a nerve.
Top-managers, they get paid millions and claim they’re worth it because of their intelligence and hands-on management styles with which they singlehandedly turn companies around. Until there’s a problem, then suddenly they’re stupid and out of touch and thus not responsable for what happened. It makes me sick.
I’m not disagreeing with you entirely. but that implies that a CEO should have the knowledge of everyone beneath them. it isn’t so crazy that a CEO wouldn’t completely understand the duties of a CFO or a CTO etc etc.
That could be a good defense!