Lifting the Lid: Steve Jobs unlikely to face SEC options suit

By Gina Keating

LOS ANGELES (Reuters) - Steve Jobs is not likely to face a government lawsuit over stock options backdating despite legal actions against a growing number of his former colleagues at Apple Inc (AAPL.O) and Pixar Animation Studios.

The two companies are among more than 200 swept up in government probes into whether they gave stock options to employees with dates carefully chosen to ensure maximum profit, a process that is illegal if not properly accounted for.

Jobs appears to have a strong case. As CEO, he may not have known about the legal implications of backdating carried out by subordinates, lawyers say. Internal audits have cleared him, and federal regulators want ironclad cases, rather than a battle against the business icon responsible for the iPod.

But two advisers to Jobs were targeted last month, and two others previously had been accused.

In addition, the U.S. Securities and Exchange Commission sued Broadcom Communications Corp Chairman Henry Samueli this month alleging backdating fraud, despite a company-commissioned audit that cleared him.

WAITING GAME

"Until the SEC tells you it's over, it isn't over," said Charles Elson, director of the Center for Corporate Governance at the University of Delaware. Pointing to the Broadcom case, Elson said the SEC generally considers internal corporate audits "interesting but not relevant."

Apple found widespread backdating without the required corporate accounting.

Options become valuable when a company's stock price rises above a level set in the option. Backdated options typically are set at a low stock price in order to make them immediately valuable. That is legal -- but only if a company takes a charge for the value of the granted options.

The SEC has cleared Apple the company, but it sued former Apple Chief Financial Officer Fred Thompson and ex-General Counsel Nancy Heinen last year and said in April it may sue former Pixar CFO Ann Mather for backdating-related fraud. Larry Sonsini, a Pixar director whose law firm acted as the company's outside legal counsel, faces similar accusations in a shareholder lawsuit filed in April.

Sonsini, who reportedly worked closely with Jobs on executive compensation at Pixar, has not been named in a government lawsuit, while non-board members Thompson, Heinen and Mather, who had no direct authority over compensation issues, have denied wrongdoing.

LOOKING FOR SLAM DUNKS

Jobs' stature may give the government pause.

"You cannot discount the fact that Steve Jobs is an immensely well-known and well-respected icon of American business," said Anthony Sabino, a white collar defender and law and business professor at St. John's University in New York.

"The government is very interested in the public opinion of the ... people who sit in the jury box," Sabino said. "If I was a prosecutor for (the Department of) Justice I would think about that."