Jobs Is Focus of Apple Questions

Granting of 2001 Options Falsified, Newspaper Says

Steve Jobs founded Apple in 1976. (Paul Sakuma - AP)

Apple Computer faces a deadline today to file a pair of overdue earnings reports that could shed light on a stock-options scandal, as new questions arise over whether executives falsified documents related to options granted to the company's chief executive, Steve Jobs.

Apple had previously delayed providing the Securities and Exchange Commission with reports for the fiscal year ended Sept. 30 and for the third quarter ended July 1. The company said it needed extra time to restate expenses connected with stock-option grants.

Company executives said this month that they were still reviewing the conclusions of a three-month internal investigation that uncovered "serious concerns" about two unidentified former officers who had backdated stock options to increase profits. The investigation, which ended this fall, revealed an undisclosed number of backdated stock-option awards made on 15 occasions from 1997 to 2002.

Apple said the investigation had found no misconduct by any current manager, but new concerns arose this week about 7.5 million options awarded to Jobs, who is also Apple's founder. In filings to the SEC in 2001, Apple said its board of directors gave Jobs the options in October 2001 at an exercise price of $18.30 per share, which was based on the fair market value at the time.

The Financial Times reported yesterday that Jobs was given the stock options without board authorization and that records showing that a board meeting was held to approve the award were later falsified.

Apple's share price fell 65 cents yesterday, to $80.87.

Earlier this week, the Recorder, a legal publication in San Francisco, reported that federal prosecutors were examining company documents that may have been falsified and that Jobs has decided he needs lawyers other than those who represent the company.

Steve Dowling, a company spokesman, declined to comment on the report. He referred reporters to Apple's statement in October, in which it said it would provide the findings of its investigation to the SEC. At the time, Apple said that Jobs was aware that favorable grant dates had been selected in a few instances but that he did not personally receive or benefit from any of them. Jobs apologized to shareholders and employees for the problems.

Spokesmen for the SEC and the U.S. attorney's office in San Francisco would not say yesterday whether they were investigating Apple.

Apple is one of nearly 200 companies that have admitted or are being investigated for backdating stock options. The practice involves picking an effective date for an option when the stock price was low, allowing the employee to make more money when he sells it.

In an industry with many notable personalities, Jobs stands out. He is more closely identified with and central to the success of his company than any other executive at a major technology firm.

He founded Apple in 1976 but was ousted in 1985 in an internal power struggle. Subsequently, the company languished and turned out lackluster products that sold poorly. After his return nine years ago, the company's fortunes revived and, on the strength of sales of the iPod digital music player, Apple's stock has outperformed much of the rest of the tech sector by a significant margin.

When Jobs underwent surgery for pancreatic cancer in 2004, users of Apple's Mac computers fretted about the fate of the company should he be incapacitated. Though Mac computers now account for only a small portion of total computer sales, Apple's influence far outweighs its market share and some analysts joke that Apple is the research-and-development division for all of Silicon Valley.

Staff researcher Richard Drezen contributed to this report.