August 14, 2008 / 4:05 PM / 11 years ago

Ex-Apple general counsel settles backdating case

WASHINGTON (Reuters) - Former Apple Inc (AAPL.O) general counsel Nancy Heinen has agreed to pay $2.2 million to settle options backdating charges, the U.S. Securities and Exchange Commission said on Thursday.

Heinen also agreed to be barred from serving as an officer or director of a public company for five years. She settled the case without admitting or denying the charges, the SEC said.

The charges relate to two large options grants to senior executives of Apple, including a grant to Chief Executive Steve Jobs of 7.5 million options in December 2001.

Apple, the fast-growing consumer electronics company, was also investigated for irregularities over its accounting for stock options awarded to employees.

The SEC later cleared the company after it cooperated with the investigation, but sued former Apple Chief Financial Officer Fred Anderson and Heinen.

Jobs has not been charged in the case. Apple declined to comment on Heinen’s settlement.

“I cherish the great people I worked with at Apple, and I am proud of my contributions to its historic turnaround and current success,” Heinen said in a statement. “With this lawsuit behind me, I look forward to addressing the greater challenges of social justice and economic disparity.”

The SEC said Heinen caused Apple to fraudulently backdate the two large grants — a February 2001 grant of 4.8 million options to Apple’s executive team, including herself, and the December 2001 grant to Jobs.

She was also charged with altering company records to conceal the fraud.

The SEC said Apple underreported its expenses by nearly $40 million as a result of the backdating.

More than 200 companies have been investigated by U.S. authorities or have conducted their own internal inquiries into possible manipulation of option-grant dates.

Backdating is not in itself illegal as long as the practice is properly disclosed and fully accounted for in financial statements.

“One thing important about this case was that it involved a general counsel who fabricated corporate documents to conceal the fraud,” said Robert Mitchell, an enforcement official in the SEC’s San Francisco office. “That’s the type of conduct the commission takes very seriously.”

As part of the settlement Heinen agreed to pay $1.6 million in disgorgement, representing the in-the-money portion of the proceeds she received from exercising backdated options, plus about $400,000 in interest. She also agreed to a $200,000 civil penalty.

Reporting by Karey Wutkowski, additional reporting by Duncan Martell in San Francisco; editing by Maureen Bavdek

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