Apple Corp. may be in trouble with the law and with its own stockholders:
Without providing specifics, the Cupertino, Calif.-based maker of Macintosh computer and iPod music players said it had uncovered enough evidence of mishandled stock options to raise doubts about the accuracy of financial statements dating back to Sept. 29, 2002.
Apple actually seems to have handled the issue as well as any company could, hiring a lawyer to investigate the options problems and to help the company get ahead of any legal troubles. But having suffered the pretensions of Mac owners for about ten years, it always warms my heart to see them reminded that Apple is just another company. Cults aren't my favorite thing, even little mini-cults like that of Mac users. It's not that Macs are bad, its just that they're not half as special as users claim, and neither is the company.
It's probably good for Apple executives that they've been proactive about dealing with potential stock problems:
While Apple hasn't explained exactly how it mishandled stock options, most of the problems at other companies so far have revolved around "backdating."
Under this practice, insiders try to make the rewards more lucrative by retroactively pinning the option's exercise price to a low point in the stock's value. Usually, a stock option's exercise price coincides with the market value at the time of a grant to give the recipient an incentive to drive the price higher.
If companies backdate options without accounting for the move, it can cause profits to be overstated and taxes to be underpaid.
The financial manipulation also exposes companies to possible fraud charges that could trigger civil fines and even criminal cases.
The U.S. Justice Department has already brought criminal charges against Brocade Communications Systems Inc.'s former CEO, Gregory Reyes, and is actively investigating other cases. Reyes, who hasn't yet entered a plea in the case, is free on a $2 million bond.
That's a lot of iTunes sales to cover that bond. College kids, get to buyin' those songs, you've got executives to bail out of jail.