Apple's ex-CFO to settle claims

The price of a stock option is for the most part determined by the stock's closing price on the day a company's board grants the option. In backdating, grant dates are changed to match the stock's lowest price during a set period, giving people who receive the grants big gains -- at least on paper -- and resulting in a company understating its compensation costs and overstating its earnings.

A shareholder lawsuit filed against Apple in December alleges that the company timed its stock option grants to coincide with corporate news in a violation of its fiduciary duty. The case is pending.

In the case of Anderson, now a managing director in a private equity firm in Menlo Park, Calif., he will agree to a settlement of claims that he filed false financial reports and had inadequate accounting controls at Apple, the person familiar with his case said.

Anderson will pay a $150,000 fine and return $3.5 million in stock option gains as part of the settlement, the person said, and won't be barred from serving as a corporate officer or director in the future.

Heinen's lawyer said the issue in her client's case was stock options granted from 2000 to 2001 to Jobs and his executive team, including Heinen.

On Jan. 12, 2000, Apple's board awarded Jobs 10 million options. The next year, the stock price dropped and Jobs' options were "underwater," below the price Jobs could exercise them.

In August 2001, the board decided to give Jobs 7.5 million new options, a grant that was discussed though not approved by the board's compensation committee in October.

In December 2001, the board finalized the grant and decided to make the value of each option the same as the price of an Apple share in October, $18.30 rather than $21.01.

Fake minutes of the December meeting were prepared to make it appear that the entire board, not just the compensation committee, met that day, according to Apple's internal investigation.

Both grants were canceled in March 2003 before being exercised, when Jobs received 5 million shares of restricted stock.

The other stock option grant under scrutiny was in January 2001 for Apple's executive team, including Heinen and Anderson.

In late 2000, Jobs approved the grant, which typically was recorded the following Tuesday. In this case, Tuesday fell on Jan. 2., a week before Apple's annual Macworld conference. Later in January, when Heinen was doing the paperwork for the grant, she was concerned that Jan. 2 was too close to the conference and would appear to be timed to news that comes out of the event, her lawyer said.

"To the extent that she had anything to do with, it was to move the grant date forward in time and upward in price," Arguedas said.

Apple's stock closed up $2.54 at $93.51 on Monday.

michelle.quinn@latimes.com