Parting Shots at Apple's Jobs

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As talk of government charges intensified in the months that followed, people close to Anderson came to his defense, including Bono, the U2 front man who is also one of Anderson's partners at Elevation Partners, a Silicon Valley private equity firm. On Jan. 3, the rocker issued this statement to BusinessWeek through a public-relations firm working for Anderson: "Fred Anderson is a man of the utmost integrity. He is a man to whom you would give the keys to your life and know it would be calmer, tidier and better organized every day he was in it."

Anderson is now free to get back to his former life. Having been charged only with not noticing backdating by others—rather than instigating it himself—the SEC did not ban him from having a role with publicly traded companies.

Eleven Counts

The same cannot be said for Heinen. The SEC complaint alleges that on both of the grants in question, the 50-year-old former chief counsel knowingly backdated and then doctored internal documents to conceal the fact from auditors, investors, and the government. These include the grant to Apple executives in February, 2001 (including herself and Anderson), and a second instance on Oct. 19 of that year, when she's accused of making up board minutes for a meeting that didn't occur in order to push through a huge 7.5-million-option grant to Jobs that was actually made two months later. The government says these grants improperly boosted the payday for the executives, and allowed Apple to avoid incurring nearly $40 million in expenses required when granting such "in-the-money" options.

Heinen's lawyer, Cris Arguedas, says her client is innocent. Regarding the grant to Apple executives, Arguedas claims Heinen wasn't backdating the grant from Feb. 2 to Jan. 17, as the complaint alleges. Rather, she says Heinen believed the options had been granted in late 2000; she was only pushing back the grant date, which Arguedas argues was legal according to the accounting rules at the time. "You can move a grant date forward in time, so long as it goes upward in price," says Arguedas.

Far from trying to bilk investors, Heinen was trying to help the company by avoiding charges that it had "spring-loaded" options grants just before Jobs gave a stock-lifting keynote at the Macworld trade show on Jan. 9, the attorney says. "She didn't do anything wrong." And yet she's being charged with 11 counts, ranging from fraud to false statements to auditors.

Off Easy?

As for the grant to Jobs, the SEC complaint hints that Heinen believed the proper grant date was Aug. 29, when Apple's board first approved the mega-grant, one of the largest ever. But then Jobs began to complain about the vesting schedule; a source tells BusinessWeek. Jobs wanted a portion of the options to be "pre-vested" so that he would not have to wait to exercise them.

Given Apple's fiscal yearend of Sept. 30, and with a November deadline for reporting the grant to the SEC looming, Heinen "became increasingly concerned about the delay," the complaint says. When those dates came and went, the SEC complaint suggests, she began looking for a date on which to grant the shares at a price similar to the $17.83 price on Aug. 29. On Dec. 17, she recommended that the compensation committee choose the date of Oct. 19—when the price of Apple shares was at $18.30. Still, this was lower than the $21.01 price on the day they were actually granted, Dec. 18, creating a windfall for Jobs.

However close the stock price, Heinen was in the wrong, says Michael Dicke, assistant regional director for the SEC's San Francisco office. If Heinen wanted to avoid the appearance of spring-loading before Macworld, why not just say so in the documents and take any charges associated with changing the date? "It's indicative of an intent to deceive," Dicke says. "The general counsel's job is to make sure the company complies with all the legal requirements. Creating phony minutes doesn't fall within that job description."

Given Jobs' role, many experts and Silicon Valley insiders have wondered whether the government would go after him—or give him a pass, given his critical importance to the company and its shareholders. Dicke denies the suggestion. "Did Jobs' prominence affect the investigation? Absolutely not. Any decision that the SEC makes about whether to bring an enforcement action is based on the strength of the evidence or lack thereof."

Burrows is a senior writer for BusinessWeek, based in Silicon Valley. With Arik Hesseldahl in New York.