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New Backdating Suit Takes Another Bite at Apple, CEO Jobs

Yet another Apple Inc. shareholder has filed a lawsuit in California seeking to prove that the company's directors wasted more than $105 million on the extra value of backdated stock options granted to CEO Steve Jobs.

This time, the plaintiff claims to have new specifics that it gathered from a records inspection action it initiated earlier in the Santa Clara County Superior Court.

However, the shareholder, the Boston Retirement Board, says it cannot put those details on paper in the new complaint because the court has not ruled yet on how the confidential information should be treated.

The pension fund says the specifics to back up its charges might have to go into an amended or sealed version of the complaint to be filed later.

In the past two years other Apple shareholders have seen their lawsuits over the backdating dismissed or stalled for lack of details to back up the charges.

All the suits concern the board's approval of hundreds of millions of stock options for Jobs and other top-level Apple executives from 1997 to 2001, which Apple admitted to in June 2006.

Jobs received stock that is allegedly now worth more than $1 billion, but he exchanged much of the backdated options for regular common shares rather than cashing in his right to buy stock and then resell it under the backdated stock options.

Lawsuits over backdating accuse corporate boards of changing the date of stock-option grants to when the stock was trading low so the recipients pay less and profit more at shareholders' expense.

When that extra compensation is not properly disclosed to shareholders and regulators, it becomes illegal.

Like the previous suits, the Boston Retirement Board's action claims that current and former Apple directors breached their fiduciary duty by unjustly enriching the option recipients.

The directors also are accused of breaking federal and state laws by filing false financial statements that did not disclose the true cost of those options.

Moreover, the directors who were members of the company's compensation and audit committees had an even greater duty to shareholders but failed to keep proper records or operate within accepted accounting guidelines, the suit says.

The pension fund says this lawsuit was not filed too late because it first had to wait for a special committee of Apple directors to investigate the backdating and issue a report and recommendations.

Then the plaintiff had to litigate the books-and-records action to get the specifics it needed to back up the allegations in this suit, it says.

"The documents Apple has produced provide critical details about Apple's backdating practices and confirm that all of Apple's directors were aware of and participated in the backdating scheme," the complaint says.

For instance, Jobs and the directors knew that the options were not dated as of when they were awarded, as required by company policy, the pension fund says.

The plaintiff says the recipients of the backdated stock options should be forced to disgorge their improper profits and that the directors who granted them should be held individually liable for the fiscal damage they caused the company.

To comment, ask questions or contribute articles, contact West.Andrews.Editor@Thomson.com.

The fund is represented by Joseph Tabacco Jr. of Berman DeValerio Pease Tabacco Burt & Pucillo in San Francisco and H. Adam Pussin of Pomerantz Haudek Block Grossman & Gross in New York.