More than 130 companies are undergoing federal investigations into their options grants and more than 50 executives and directors have retired, resigned or been fired as a result of stock options internal investigations.The Department of Justice has formed a stock options taskforce to coordinate the criminal investigations.A similar lawsuit against Anderson was filed but simultaneously settled.
The Securities and Exchange Commission prevailed in its jury trial against Jasper in April 2010, but it has taken until now for the case to wind through the U. He was ordered to repay Sunnyvale, California-based Maxim $1.8 million, as well as pay a civil penalty of $360,000.
The practice of backdating stock options as a way of retaining valued employees is legal, as long as the true expense of the backdated options is recorded as a company expense for employee compensation.
In comparison, had the options been granted at the year-end price when the decision to grant to options actually might have been made, the year-end intrinsic value would have been zero.
Backdating does not violate shareholder-approved option plans.
Jasper signed all of Maxim’s filings with the SEC at that time.
Liability was found in the Maxim case partly because backdating and a failure to expense the practice were proven, Fickes notes.
The lawsuit comes after months of investigation by both regulators and Apple into the backdating, which Apple has made to Jobs and other executives--including Heinen and Anderson.
The SEC is charging that Heinen fraudulently selected earlier grant dates for two options grants, one in February 2001 to several Apple executives including Jobs, Anderson and herself, and one in October 2001 to Jobs.
The Wall Street Journal (see discussion of article below) pointed out a CEO option grant dated October 1998.
The number of shares subject to option was 250,000 and the exercise price was (the trough in the stock price graph below.) Given a year-end price of , the intrinsic value of the options at the end of the year was (-) x 250,000 = ,750,000.
Criminal Investigation Potential Criminal Charges Potential Defences Consequences of a Guilty Plea or Verdict On October 24 2006 the growing stock options backdating scandal reached a milestone when David Kreinberg, former head of finance at software maker Comverse Technology Inc, received the first criminal conviction to stem from the scandal.