Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Sunday, April 29, 2007

Perspective on The Past Week's Stories

The big news for law professors and corporate attorneys is the SEC's complaint charging Nancy Heinan, former GC at Apple, with securities fraud for backdating stock options.  The complaint focuses on two stock option grants.  One involved the grant of 4.8 million options to six executives (including Heinan and Anderson, the former CFO who settled with the SEC).  According to the complaint, in late January Heinan provided Steve Jobs with a list of daily closing prices for Apple stock for the month of January and suggested a date for the stock option grant. The complaint does not allege that Jobs responded to this, but alleges that on February 1 Heinan told Anderson that Jobs had agreed on a date of January 17.  Heinan then allegedly directed her staff to prepare an unanimous written consent showing board approval of the grant on January 17.  The other grant involved 7.5 million options to Jobs that was finalized on December 18, 200, after months of negotiations over the vesting schedule, and then backdated to October 19.  The complaint alleged that Heinan created fictitious minutes for a special board meeting on October 19.

On the same day that the SEC charged Heinan and settled with Anderson, Anderson released a statement through his attorney in which he stated that in late January he advised Jobs about the accounting implications of backdating and charged that Jobs misled him by telling him the board had earlier approved the grant. Apple has previously said that Job helped in selecting option grant dates, but did not understand the accounting issues.

Another significant settlement -- outside directors of Just For Feet settled misrepresentations, conflict of interest, breach of fiduciary duty and bad faith claims with the bankruptcy trustee for $41.5, reportedly the largest settlement by outside directors.  The company failed in 1999 because of an accounting fraud.

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