Does Al Gore have an options problem?

Posted by: Peter Burrows on August 24

Everyone knows the former Veep is on Apple’s board, but he’s also on the board’s compensation committee. That raises the odds that he could land on the hot-seat if it turns out that Apple’s stock options “irregularities” are of the sort that lead to civil or even criminal charges. In fact, former members of the comp committee at Mercury Interactive were notified by the SEC in June that they’re likely to face civil charges. With that instance in mind, one SEC expert who requested anonymity says: “If there’s a problem at Apple, Gore’s globe is going to be warming.” Call it An Inconvenient Truth.

Now, I’m not saying this is going to happen. In fact, I’ll eat my hat if it does. So why bother writing the post? Because the fact is that Al Gore is Al Gore, and the possible ramifications—no matter how remote—are just so great. Just think of it: George Bush’s SEC or even DOJ going after a potential Democratic presidential candidate, and the man who many believe beat Bush in 00. Can you imagine the headlines? The partisan rancor, with outraged Liberals accusing the Bushies of Nixonian abuses of power, and Conservatives pointing to more evidence of Democratic ethical emptiness?

Again, I don’t think it will come to that, and here’s why: because this scenario would be based on an unlikely eventuality (that Apple will indeed be found to have fraudulently and massively abused options accounting rules) on top of an another unlikely eventuality (that the government will find the compensation commitee members individually culpable.)

Most likely, neither of these stars will line up that way. My hunch is that Apple will finish its internal investigation, make a smallish restatement to earnings that investors will hardly notice, and that will be that. As for unlikely eventuality No. 2, it seems reasonable that the Feds would only charge compensation committee members who played an active role in designing and supporting illegal schemes. And Gore didn’t join Apple’s board until 2003—while the company so far has said it has only found irregularities from the 1997-2001 timeframe.

But what if the Feds are setting a lower bar? What if they're investigating Mercury's former directors not because they're outright crooks, but simply because they were lousy directors who failed in their duty to provide proper oversight on behalf of the company's shareholders? (Judging from Mercury's own SEC filings, they were so asleep at the switch that they didn't notice 49 separate instances of improper backdating). If poor oversight is the bar set by the Feds to bring charges, plenty of comp committee members could end up being vulnerable. The fact that Gore is a life-long politician with little to no corporate experience might make him that much more vulnerable, notes Charles Elson, head of the Center for Corporate Governance at the University of Delaware. “It comes down to did you know what was going on, and if you were not aware were you diligent in carrying out your duties.” Asked if Gore could face charges if Apple turns out to have broken the law, he says: "there is that potential. It depends on what comes out.”

Indeed, I wonder what impact Gore's involvement is having on any potential government investigation of Apple's books. It's worth exploring the very delicate situation the Feds find themselves in. Is having Gore on Apple's board causing them to take a more conservative approach--to give Apple more time or guidance to finish its own investigation, so that they would have more conclusive data on which to base their next steps? That way, they would be less likely to be accused of political motivation should they pursue a case against Apple and/or Gore. But even that could backfire. “They would have to treat Apple exactly as if it were any other company," says my anonymous SEC expert. "It can't be treated any better, and it can’t be treated any worse--especially because Steve Jobs and a potential presidential candidate are involved.”