Feeds

Apple sued in widening stock option probe

Dot.com scandal claims more scalps

Designing a Defense for Mobile Applications

Apple is being sued over its awarding of stock options. Two separate suits have been started by shareholders which make claims against current and former officers of Apple, the company announced.

The California computer maker has been caught up in a widening Silicon Valley controversy over the awarding of stock options during the dot.com boom. Some firms have already admitted awarding options at lower than market values in order to maximise their worth to employees.

Apple is the biggest name to be involved in the growing scandal. The company announced last week that it had uncovered irregularities in the awarding of some of the options awarded between 1997 and 2001, including those to co-founder and chief executive Steve Jobs.

The two lawsuits are believed to come from investors in the company and have been filed in the Northern District of California and the Superior Court for Santa Clara County.

"Last week, Apple proactively announced that it had discovered irregularities in the issuance of certain stock option grants and is conducting an independent investigation into the matter," Apple said in a statement. "The company is currently evaluating its response to the lawsuits."

More than 50 quoted companies are being investigated by the US Justice Department and financial regulator the Securities and Exchange Commission in allegations of manipulation of stock options.

Stock options operate by making shares available to an employee at a certain guaranteed price, even in the future. If the value of shares rises, the amount by which they rise is profit for the owner of options.

Discounted options would make the award more valuable for the employee because the potential profit was larger. Shareholders are likely to object to the practice because the firm must pay the price of that award by releasing equity in the company at lower than market prices.

The practice is legal when properly approved by the company's board and when shareholders are informed. Shareholders have grounds for dispute when proper procedure has not been followed.

The scandals could eventually lead to Silicon Valley companies restating their financial results, and could have knock on effects on auditors who failed to stop the practice. Already, the San Jose Mercury News has reported that semiconductor maker Micrel is suing its auditor Deloitte & Touche over its award of discounted options.

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

Bootnote: Congratulations to Pinsent Masons, the firm behind outlaw.com, which has been named IT/IP Team of the Year by The Lawyer magazine.

Using blade systems to cut costs and sharpen efficiencies

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
Microsoft: We're making ONE TRUE WINDOWS to rule us all
Enterprise, Windows still power firm's shaky money-maker
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.