Apple’s ex-CFO hits back at alleged stock fraud


25 Apr 2007

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Ex-Apple chief financial officer Fred Anderson last night issued a statement insisting Apple CEO Steve Jobs was warned about the accounting implications of backdating share options.

The statement comes after months of investigation into alleged stock option fraud at Apple by the US Securities and Exchange Commission (SEC). Apple admitted the backdating occurred in relation to two options grants made to Jobs and other executives, including Anderson.

The SEC has filed a lawsuit against another executive, Apple former general counsel Nancy Heinen. A similar case that was brought against Anderson has been settled.

It was alleged that Anderson and Heinen benefited from the backdating when each received a portion of 4.8 million options that Apple granted to six members of its executive team.

Andersen settled the claims without admitting or denying any of the allegations but as part of the settlement has to hand back US$2.9m, plus prejudgement interest of US$528,107 and pay a civil monetary penalty of US$150,000.

In a statement from Anderson’s attorney outlining his “longstanding impeccable reputation” as “one of the most ethical CFOs in the nation”, the terms of the settlement allow him to continue to practice as an officer or director of public companies.

Regarding the stock options grants, Anderson’s attorney stated: “Fred was told by Steve Jobs in late January 2001 that Mr Jobs had the agreement of the board of directors for the executive team grant on 2 January, 2001. At the time Mr Jobs provided Fred this assurance, Fred cautioned Mr Jobs that the executive team grant would have to be priced based on the date of the actual board agreement or there could be an accounting charge.

“He further advised Mr Jobs that the board would have to confirm its prior approval in a legally satisfactory method. He was told by Mr Jobs that the board had given its prior approval and the board would verify it. Fred relied on these statements by Mr Jobs and from them concluded the grant was being properly handled.”

The SEC is focusing heavily on the issue of backdating of stock options, whereby the grant date of the option is changed to a time when the stock price is lower, allowing the recipient to buy the stock at a lower, fixed price. This enables them to enjoy profits that would not have been previously possible.

It is understood that up to 140 companies are currently facing investigation over backdating of stock options, dubbed the “crack cocaine” of the Nineties as millions of workers of US companies received stock options.

By John Kennedy

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