SEC Takes Bite Out of Apple's Ex-Counsel - www.cfo.com - Aug. 14, 2008

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SEC Takes Bite Out of Apple's Ex-Counsel

Heinen agrees to settle backdating charges for $2.2m. She worked closely with ex-CFO Anderson, who settled for $3.6m last year.

Stephen Taub
CFO.com | US

August 14, 2008

The former general counsel of Apple Inc., Nancy R. Heinen, agreed to
pay $2.2 million to settle Securities and Exchange Commission
stock-option backdating charges.

Heinen agreed, without admitting to or denying the allegations, to
terms that bar her from serving as an officer or director of any public
company for five years, and to be suspended from appearing or
practicing as an attorney before the commission for three years.
According to the SEC's April 2007 complaint, Heinen caused Apple to
fraudulently backdate two large options grants to senior executives of
Apple — a February 2001 grant of 4.8 million options to Apple's
executive team and a December 2001 grant of 7.5 million options to
Apple CEO Steve Jobs. The original complaint also said that sheltered
company records to conceal the fraud.

The complaint alleged that as a result of the backdating Apple underreported its expenses by nearly $40 million.

Also in April 2007, former Apple CFO Fred D. Anderson agreed to pay more than $3.6 million to settle SEC charges stemming from his role in the company's options backdating scandal.

Last year there was much discussion about how deeply Jobs himself
was involved with any backdating-related decisions. Apple has
maintained that the CEO did recommend "favorable" dates for some option
awards, but that he did not "appreciate the accounting implications" of
date selection. (The board committee, chaired by former Vice President
Al Gore, expressed "complete confidence in Steve Jobs.") An attorney
representing Anderson, however, talked of discussions between the two
men in which the CFO advised Jobs that grants "would have to be priced
based on the date of the actual board agreement or there could be an
accounting charge." The attorney also said that Anderson had "advised
Mr. Jobs that the board would have to confirm its prior approval in a
legally satisfactory method," and that Jobs told Anderson that the
board had given prior approval. "Fred relied on these statements by Mr.
Jobs and from them concluded the grant was being properly handled," the
attorney said at the time.

The commission said last April that it would not bring any
enforcement action against Apple itself, citing the company's "swift,
extensive, and extraordinary cooperation" that included prompt
self-reporting, an independent internal investigation, the sharing of
the results of that investigation with the government, and the
implementation of new controls designed to prevent the recurrence of
fraudulent conduct.

Heinen was senior vice president, general counsel, and corporate
secretary at Apple. In that position, among other things, she had
responsibility for overseeing Apple's legal group and preparing and
certifying the minutes of Apple's board and its committees. Heinen left
Apple in May 2006.