Parting Shots at Apple's Jobs

Former CFO Fred Anderson reached a settlement with the SEC over options backdating—but says the CEO deserves part of the blame

by Peter Burrows

Before emerging from one of the most high-profile options backdating cases with little more than a slap on the wrist, former Apple (AAPL) executive Fred Anderson landed some parting shots of his own.

The Securities & Exchange Commission brought an apparent end to its investigation of the handling of stock options at Apple by charging two former executives, Chief Counsel Nancy Heinen and Chief Financial Officer and Director Anderson, for their roles in improperly issuing two large options grants in 2001. Except for a shareholder suit, Apple is likely out of the woods on the legal front. The SEC said it won't bring enforcement actions against the company, citing Apple's "swift, extensive and extraordinary cooperation in the Commission's investigation." And having received a pass from the SEC, it is unlikely Apple will face any criminal charges from the Justice Dept., legal experts and financial analysts say. "Most investors think this is an all-clear," says Piper Jaffrey analyst Gene Munster.

All in the Timing

But longtime CFO Anderson, known for his even-tempered, behind-the-scenes persona, did not go quietly. He has largely bucked any serious personal legal damage, settling charges against him and agreeing to pay a $150,000 fine and repay $3.5 million in windfalls from backdated options. He didn't admit or deny guilt—though his lawyer issued a statement that points a finger at Apple Chief Executive Steve Jobs for his role in the scandal and calls into question a statement issued by Apple in December that exculpated Jobs for his role.

At issue is precisely when Apple's board gave approval for option grants for Jobs and others to purchase shares, and the role company officials played in misrepresenting grant dates so recipients got a bigger payout than they were due. More than 200 companies have admitted to government or internal investigations into the handling of stock options.

For one, Anderson says the board of directors signed off on one options grant later than Jobs said it did. Anderson says Jobs told him in late January, 2001, that he'd obtained the board's approval for a grant to top Apple executives (including Anderson, who was then CFO) on Jan. 2. Only later, he claims in the letter, did Anderson learn that directors did not actually O.K. the grant until around the time they signed the actual paperwork in early February. The suggestion is that had he known, Anderson would not have allowed Apple to issue the options without properly disclosing the details.

Conflicting Narratives

That wasn't Anderson's only shot. His lawyer, Jerome Roth, also says Anderson warned Jobs at the time that Apple would likely need to take an accounting charge if it issued options on any day other than Jan. 2. In fact, the company ultimately claimed they were granted on Jan. 17.

In an interview, Roth says his client is not accusing Jobs of lying. "We just want our view of what occurred to be known, so that it would not be speculated that he had done something that he hadn't done," says Roth. But Anderson's narrative flies in the face of the position taken by Apple last December, when its board admitted to frequent backdating but exonerated Jobs—in part because Jobs "did not appreciate the accounting implications" of backdating.

Apple spokespeople did not respond to Anderson's charges. But sources say that Anderson, who helped stave off bankruptcy around the time Jobs returned to the helm in 1997, has been irked by his treatment at the hands of his former employer in recent months. Having been asked to join Apple's board when he left the CFO post in 2004 to become a tech financier, sources say Anderson resigned his directorship last September upon learning he would likely be implicated in the company's exhaustive investigation of the backdating.

Bono Benefit

On Sept. 30, Anderson e-mailed his resignation from Apple's board to fellow directors. In the letter, which has been seen by BusinessWeek, Anderson said he was leaving to "avoid even the appearance of any conflict of interest arising from my continued service as a director." When Apple announced his departure a few days later, it made no mention of Anderson's explanation.

Instead, Apple coupled the announcement with the news that "two former officials," widely thought to be Anderson and Heinen, were probably responsible for Apple's backdating miscues. His concern was that Apple's handling of the announcement made it seem as though Anderson was not disputing talk that he was one of the wrongdoers.