Font Size: 
SEC Settles With Former Apple GC Over Backdating
The Recorder
August 15, 2008
Close the book on the government's Apple-related backdating litigation.
The Securities and Exchange Commission announced a settlement Thursday with Nancy Heinen, former general counsel at the Cupertino, Calif.-based leviathan. Under the terms of the deal, Heinen will pay $2.2 million in disgorgement and fines. She will also be barred from serving as an officer or director at a public company for five years, and will not be allowed to practice before the commission for three years.
In addition, the SEC secured injunctions against Heinen prohibiting her from future violations of any of the statutes under which she was charged. While these injunctions are viewed by many as having little practical effect, some securities lawyers say that if the SEC charges someone under a statute, but then fails to enjoin them in a settlement, it is a signal that regulators did not view that part of their case very strongly.
"There are cases we choose to settle for less than all of the claims," said SEC trial counsel Robert Mitchell. "This was not one of them."
The monetary penalty shouldn't cripple Heinen, who has cashed in at least $50 million in Apple stock. Her lawyer, Miles Ehrlich of Ramsey & Ehrlich, said in a prepared statement that the settlement isn't an admission.
"It's a recognition that life is short. And rather than spend her energy fighting a lawsuit without end," Ehrlich said, "she decided she'd rather devote her talents and time to making positive change in our society."
For her part, Heinen sounded like she would seek a different type of work. "With this lawsuit behind me, I look forward to addressing the greater challenges of social justice and economic disparity," she said in a statement.
Earlier this year, the Northern District U.S. Attorney's Office dropped its criminal Apple probe without charging anyone. Last year, the SEC settled with Apple's former CFO, Fred Anderson, for $3.5 million.
Heinen discussed a now-problematic options grant to Steve Jobs with Wilson Sonsini Goodrich Rosati partner Larry Sonsini in the fall of 2001. But according to a lawyer familiar with the case, Heinen's settlement came before Sonsini received a deposition notice.
Heinen must disgorge $1.6 million, the result of an "executive team" grant made to a handful of honchos in 2001. Heinen received 400,000 shares in early February, but backdated them to Jan. 17, when the stock was trading nearly $4 lower, the SEC alleged in its complaint.
To accomplish this, Heinen ordered one of her staff attorneys to submit a unanimous written consent that falsely represented that the grant was approved on Jan. 17. While the complaint did not identify that lawyer, former Apple staff attorney Wendy Howell was pushed out by the company in the aftermath of the backdating scandal and was cooperating with authorities. The SEC's Mitchell declined to discuss details of the agency's litigation strategy.
The $200,000 penalty Heinen must pay is similar to Anderson's $150,000 fine. Those work out to much lower disgorgement-to-penalty ratios than what is found in insider trading cases, where securities lawyers say it is usually one to one. Mitchell said Congress authorized treble penalties for insider trading cases, which gives the agency more leverage in pursuing larger fines.
