Can Ignorance Put Apple's Jobs in Clear?

Apple Computer Inc. CEO Steve Jobs gestures at the MacWorld conference in this January file photo in San Francisco. (AP Photo/Paul Sakuma, FILE) (Paul Sakuma - AP)

SAN JOSE, Calif. -- Ignorance can be bliss, but it's not a tight defense, lawyers say. When Apple Computer Inc. disclosed Wednesday its internal investigation had uncovered some stock-option backdating, the company said CEO Steve Jobs was aware of the practice but unaware of its accounting implications. The probe also did not find any misconduct by Jobs or other current officers, the company said.

Many details remain unknown, but the acknowledgment did help appease Wall Street worries that Jobs, the legendary and charismatic leader of Apple, would somehow lose his position over a stock-option imbroglio that has ensnared more than 100 other companies nationwide.

In a blend of semantics and general legal analysis, however, securities experts say Jobs could still face some kind of penalty over the situation.

"Ignorance is usually not a good defense," said Jeffrey Siegel, a veteran securities lawyer and partner at Blank Rome LLC in New York. "Executives are expected to understand the laws applicable to their companies and the rules of their required disclosures."

The practice of backdating occurs when a stock option's exercise price is set at a point lower than the prevailing market price, which can inflate the recipient's award.

The manipulation itself isn't necessarily illegal, but securities laws require companies to properly disclose the practice in its accounting and settle any charges that may result.

If a company doesn't properly deduct the compensation-related expenses, profits could be exaggerated and taxes could be underpaid.

Siegel and other lawyers say it doesn't appear that any criminal charges would result since prosecutors have to prove intent to commit fraud and Apple's disclosure did not suggest that was the case here.

"Jobs' claim that he was 'unaware of the accounting implications' ... suggests that he may have made a good faith mistake in understanding the significance of the backdated options," said Scott Meyers, head of the litigation practice at Levenfeld Pearlstein LLC in Chicago.

But even with an "inadvertent" mistake, civil repercussions could occur, Siegel said. They could range from a ruling prohibiting the executive or company from committing further violations to monetary fines.

But it will all depend on the facts _ of which no one yet has a clear picture.

In any case, Apple faces more scrutiny.

Apple, which initiated its own stock options probe in June, has been voluntarily providing information to the Securities and Exchange Commission. It also announced the resignation of its former chief financial officer, Fred Anderson, from the board of directors. And it said its investigation raised "serious concerns" over the accounting actions of two unnamed former officers.

Citing an unnamed source, the Wall Street Journal reported Thursday that federal prosecutors have begun to investigate Apple, and that Apple lawyers met with prosecutors and securities regulators earlier this week.

SEC spokesman John Heine would not confirm or deny whether the agency has launched an investigation. The spokesman for the U.S. Attorney's Office in the Northern District of California, which created a stock-options task force in July, did not return a phone call to comment.

Apple spokesman Steve Dowling declined to confirm or deny whether authorities were investigating the matter, but said that "Apple continues to proactively inform the SEC of its findings."