• silicon.com
• Management
• CIO Insights

By Stephen Shankland, 5 October 2006 08:30

NEWS

Apple's investigation into stock option grants has led to the resignation of a former chief financial officer from the company's board of directors.

An investigation by a special committee of Apple's board found irregularities with stock option grants made between 1997 and 2002, the company said in a statement on Wednesday. The investigation started about three months ago.

Following the probe, Fred Anderson, who served as Apple's CFO from 1996 until 2004, has resigned from his seat on Apple's board, the company said.

Apple CEO Steve Jobs, in a few instances, was aware that favourable grant dates had been selected, Apple said in its statement. "But he did not receive or otherwise benefit from these grants and was unaware of the accounting implications," the company said.

Jobs said in the statement: "I apologise to Apple's shareholders and employees for these problems, which happened on my watch. They are completely out of character for Apple. We will now work to resolve the remaining issues as quickly as possible and to put the proper remedial measures in place to ensure that this never happens again."

An Apple spokesman said: "Fred believed it was in Apple's best interests that he resign from the board at this time. We're providing all details regarding the investigation to the SEC [Securities and Exchange Commission]."

The investigation found no misconduct by any member of Apple's current management team but did raise "serious concerns" regarding the actions of two former executives in connection with the accounting, recording and reporting of stock option grants, Apple said in its statement. Dowling declined to expand on those concerns.

Option grants made on 15 occasions between 1997 and 2002 appear to have grant dates preceding their approval, a practice known as backdating. The most recent evidence of irregularities relates to a January 2002 grant, the company said. Irregularities affect six per cent of the overall grant dates during that period, Dowling said.

The company and its auditors are reviewing the findings of the investigation. Apple is likely to restate its historical financial statements to record non-cash charges relating to past stock option grants, the company said. The amount of such charges, the resulting tax and accounting impact, or which periods may require restatement, have not been determined.

The SEC has said at least 80 companies are the subject of probes relating to stock-option backdating. In addition, Apple and other companies - including CNET Networks, publisher of silicon.com - have announced their own investigations.

Apple disclosed in June it began an independent investigation into stock option "irregularities". It said on Wednesday investigators had scrutinised 650,000 emails and documents and interviewed more than 40 current and past employees.

Stephen Shankland writes for CNET News.com