CEO Steve Jobs and other Apple executives have settled a lawsuit alleging the company was harmed by its backdating of stock options to employees.
Jobs and 12 other Apple officials have agreed to pay US$14 million to settle the lawsuit, plus pay nearly $8.9 million in attorney’s fees and expenses. The settlement, approved Monday by Judge Jeremy Fogel of U.S. District Court for the Northern District of California, also requires Apple’s board of directors to create new rules for giving employees stock options and appoint a committee to oversee stock trading by employees.
Apple stockholders filed multiple lawsuits after Apple announced it had uncovered some options irregularities. Sixteen stockholder lawsuits were consolidated into one complaint in late 2006.
In a typical backdating scheme, a company grants stock to executives and employees and backdates the grants to correspond with lows in the stock price.
Apple conducted an internal investigation, which revealed that 6,428 stock-option grants had been improperly backdated between 1997 and 2002. The investigation found that Jobs was aware of the grants, but he did not financially benefit from any of them.
Apple took an additional after-tax charge against earnings of $84 million in 2006 to account for the options.
In April 2007, the U.S. Securities and Exchange Commission charged Nancy Heinen, the company’s former general counsel, of fraudulently backdating stock options. The U.S. Department of Justice also looked into the options backdating at Apple, but closed the investigation in July without charging anyone.