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Apple to Settle Backdating Case for $14 MillionApple Inc. and several of its officers and directors, including chief executive Steve Jobs, have agreed to settle a stock options backdating case for $14 million. According to court filings, Apple also agreed to pay $7.3 million in attorney fees and $300,000 to plaintiffs in the federal actions, as well as $1.2 million in attorney fees and $50,000 in expenses to plaintiffs in the state cases. The company also agreed to certain corporate governance changes.
The National Law Journal2008-09-10 12:00:00 AM
Apple Inc. and several of its officers and directors, including chief executive Steve Jobs, have agreed to settle a stock options backdating case for $14 million, plus attorney fees and costs.
According to court filings this month, Apple also agreed to pay $7.3 million in attorney fees and $300,000 to plaintiffs in the federal actions, as well as $1.2 million in attorney fees and $50,000 in expenses to plaintiffs in the state cases. In re Apple Computer Inc. Derivative Litigation, Master File No. C-06-04128 (N.D. Calif.).
The company also agreed to certain corporate governance changes.
On Monday, a federal judge preliminarily approved the settlement and set a final settlement hearing for Oct. 31.
In addition to Apple and Jobs, the defendants are: former chief financial officer Fred D. Anderson and chief financial officer Peter Oppenheimer; chief operating officer Timothy D. Cook; former general counsel Nancy Heinen; senior vice president Ronald B. Johnson and former senior vice presidents Mitchell Mandich, Jonathan Rubinstein and Avadis Tevanian Jr.; and board members William V. Campbell, Millard S. Drexler, Arthur D. Levinson and Jerome B. York.
Last month, Heinen agreed to pay $2.2 million to settle options backdating charges brought by the U.S. Securities and Exchange Commission. Anderson had agreed last year to pay $3.5 million to settle SEC claims against him.
The lead plaintiffs lawyers, Mark Molumphy, a partner at Burlingame, Calif.-based Cotchett, Pitre & McCarthy, and J. Gerard Stranch IV, a lawyer at Branstetter, Stranch & Jennings in Nashville, Tenn., did not return calls for comment.
In court papers, the plaintiffs said the settlement "provides an excellent monetary recovery." While maintaining the merit of their case, plaintiffs acknowledged the expense and length of continuing the litigation. So did Apple and the individual defendants, who denied liability.
A lawyer for Apple, George A. Riley, a partner in the San Francisco office of O'Melveny & Myers, did not return a call for comment. Lawyers for the other defendants either did not return calls or declined to comment.
In court papers, Apple said "most of the grants cited in the federal complaint could not give rise to recoverable damages because they were not misdated or the grants were cancelled before they were exercise, thereby providing no benefit for the grant recipient and imposing no loss on the Company. Proceeding with the litigation, however, will impose extensive and unrecoverable costs in the form of attorneys' fees and expenses."
Apple also said the plaintiffs had a high unlikelihood of succeeding, given, among other things, claims that were time-barred.
The settlement ends 14 derivative federal actions and five state derivative suits brought against Apple.
An internal investigation at Apple found stock option grants had been backdated from 1997 to 2002 but no member of management, including Jobs, was accused of any wrongdoing.
The revelation forced the Cupertino, Calif.-based company to record $84 million in expenses.