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Apple Shareholder Lawsuit Dismissed

Posted by Zonk on Fri Nov 16, 2007 09:39 AM
from the hard-to-get-anything-past-them dept.
Government The Courts Businesses Apple News
explosivejared wrote with a ZDNet article about Apple's win in the shareholder stock-options backdating lawsuit. This jives with Apple's own internal investigation of the matter. "The New York City Employees Retirement System had sued Apple claiming that the company's practice of backdating stock options diluted the value of the stock. Apple has admitted that it improperly backdated stock options on several occasions, including two awards to CEO Steve Jobs, and last December it took a $84 million charge to account for the options. But the suit had to show that Apple shareholders lost money in order to recover damages ..."
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[+] NYT Reports Steve Jobs' Exoneration 129 comments
heyitsgogi writes "The New York Times is reporting that Apple has cleared Steve Jobs of any wrongdoing. From the article: 'In a filing with the Securities and Exchange Commission, Apple said that while its investigation revealed that the company's stock option procedures did not include sufficient safeguards to prevent manipulation, Mr. Jobs did not benefit financially from any questionable stock awards.' As a result of the internal investigation, Apple said it would record $84 million in expenses related to the options awards."
Firehose:Apple Shareholder Lawsuit Dismissed by explosivejared (1186049)
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  • Must have lost money (Score:4, Funny)

    by noidentity (188756) on Friday November 16 2007, @09:42AM (#21377807)

    But the suit had to show that Apple shareholders lost money in order to recover damages ...

    Well, they certainly have now, with all the legal fees for this lost case!

  • So basically... (Score:5, Insightful)

    by faloi (738831) on Friday November 16 2007, @09:59AM (#21377999)
    Apple did something wrong. Admits they did something wrong and paid fines. Shareholders didn't technically lose money, so they can't sue for compensation for the wrongdoing.

    You'd think the shareholders would've figure out whether they actually lost money before bringing the suit. Or waited for the volatile market to drop some so they would be losing some money arguably due to the backdating, and then sued.
    • The shareholders did lost money in the form of lowered earnings per share. Of course, that's something that can be hidden in the end-of-year income statement. Anyone know how Apple accounts for stock options? Are they still using footnote disclosure, or are they actually expensing the cost of the options using the intrinsic value method?
    • Minor nitpick: Apple didn't pay a fine they 'took a charge', which is an accounting adjustment. It still hurt them on paper to the tune of $84 million, but it's not exactly the same thing.

      But, yeah...that's pretty much correct otherwise. In order to sue for damages, you actually have to, you know, show and prove actual damages. Duh. What kind of lawyer did these idiots hire anyway?

      • Re:So basically... (Score:5, Informative)

        by gnasher719 (869701) on Friday November 16 2007, @10:46AM (#21378577)

        Minor nitpick: Apple didn't pay a fine they 'took a charge', which is an accounting adjustment. It still hurt them on paper to the tune of $84 million, but it's not exactly the same thing.
        Another nitpick: Share_holders_ were not actually damaged at all. Share options were given out, but not accounted for in the correct way. That means that paper profits were too high. This was later adjusted down by $84 million. However, the actual profit was not changed at all, just the reported profit.

        You were only affected if you bought Apple after the backdating happened, assuming that Apple was worth more than it actually was, and sold after the adjustment, when everyone knew the true value. Or if you bought before the backdating, and sold afterwards, so you got more money for your shares than you should have.

        If you bought before the backdating happened and kept your shares, then you wrongly believed for a few years that your shares were worth more than they actually were, but that is not damaging.

    • Apple did something wrong.
      Ridiculous! That would violate the Second Law of Mac-tonian Thermodynamics: "The Apple Computer Corporation can only become cooler over time."

      Every fanboy know this.

      • Re:So basically... (Score:5, Insightful)

        by bennomatic (691188) on Friday November 16 2007, @02:02PM (#21381303) Homepage
        Oh, don't be silly. Nobody is claiming that they did not do something wrong. Nobody is even really supporting the idea that it was an innocent mistake. They should have known better, and IIRC, someone did lose their job over it.

        What people are saying is that anyone who has held AAPL stock for any length of time over the last five years has made money--potentially lots of it--not lost it.

        Was there a period of time where their apparent earnings were incorrectly valued at $84 million over what they should have been, and did that artificially inflate the stock value? Yes and probably. Was it wrong? Yes. Should people be able to sue for damages because they only made $10,000 off their investment instead of $15,000? I could probably argue both sides, but the story here is that the courts have said no.

        For those people who are calling Jobs a crook and saying that he should be axed for this, I can probably see both sides of the equation. But I highly doubt that this was a planned attempt on his part to defraud anybody. Backdating options isn't illegal; reporting it incorrectly is, and that was the problem. It was fixed, and the hit to the stock value probably hit Jobs more than any other single shareholder. And gee, not that I want to see a criminal running a company I've invested in, but I think he's paid his dues, and if he were to leave, I think it's likely that AAPL would take a pretty significant dive, hurting shareholders more.

        Just my $0.02

    • Public accounting 101.

      Chapter 1: Balance Sheet

      Assets = Liabilities + Shareholders Equity

      Your company occurs a fine. So to Pay off the fine they will need cash to do it. To keep the Balance Sheet Balanced they will need need to Reduce Cash by the fine amount and take the money away from Shareholders Equity.

      So yes they lost money. The Shareholder my not had it directly effect their bank account but if Apple Decided to call a quits or got bought by Dell then they would receive less from their portion of owner

      • Re:So basically... (Score:5, Insightful)

        by gnasher719 (869701) on Friday November 16 2007, @10:51AM (#21378627)

        So yes they lost money. The Shareholder my not had it directly effect their bank account but if Apple Decided to call a quits or got bought by Dell then they would receive less from their portion of ownership.
        You are completely wrong. Apple did not pay a fine at all. Apple corrected their profit numbers which had been calculated incorrectly. And you may not believe it, but Apple actually benefits from this financially: Since it was found out that options were backdated, Apples profits were less than everyone (including Apple) assumed, so Apple paid too much in taxes, which they now get back. On the other hand, those people who received the options received more from Apple than they had believed, so they made more profit than believed, and they have to pay taxes for the difference.

      • Re:So basically... (Score:4, Interesting)

        by nelsonal (549144) on Friday November 16 2007, @02:28PM (#21381691) Journal
        This deals with options the company grants to employees, which are an expense, but one paid (eventually) with shares of the company. The options were granted with value, which should have been reflected on the income statement, but the value won't be paid directly, rather the company will create and issue new shares which don't have a "cost" to the company, but reduce the proportion of ownership that the remaining shareholders own. Apple said the options were issued on a certain day with the price on that day as the strike price, (which accountants still allow to be called a no cost transaction) but the options were actually issued later when the stock was at a higher price.
        This is especially interesting because when back dated options are granted to employees, fewer shares are required (because the options are already in the money) so the ultimate hit to other shareholders is smaller, but accountants would require an expense be created reducing current earnings, so the company decieved the accountants and shareholders on the day the options were granted.

    • Apple did something wrong. Admits they did something wrong and paid fines. Shareholders didn't technically lose money, so they can't sue for compensation for the wrongdoing.

      You'd think the shareholders would've figure out whether they actually lost money before bringing the suit.
      This is America: If you sue somebody you can make money - thus if you don't sue, you lose that money.
  • Yeah, those retired New York City public workers are real capitalist swine (read the article).

    Pensions make up massive amounts of the stock market through sheer weight of numbers, it's hardly a bad call making sure they're getting everything they should for their members retirement funds, is it?
      • I'd say that it's their job to be pretty certain of success before launching these kind of lawsuits. The costs for this failure will be borne by the members, who will see a reduced retirement fund now.

        The legal-action door is still open, but I'd be surprised if they proceed with any further cases, given their original was judged to have had no merit.

        If I were a member, I'd be pretty upset with the current crop of bozos running the fund. After all, the share price wasn't hurt by the backdating so I would not
  • this is what i like about slashdot, they also tell you how things end.

    most news sources rant big on 'scandals', 'big changes', etc. but the news that it all ended with out much effect does usually not make it to a head line.

    thank you slashdot.
      • Well I think it is an issue that Apple Right now is delivering better quality products then the rest of the competition right now... If you have been reading slashdot from say a decade ago, we were much more critical of Apple. eg "No Wirelsess, Less Space then Nomad... LAME" You can state we care about the politics and stuff but it really comes down to who is delivering the best product at the time. Even most of the Open Source Zealots they will support FSF no matter how evil they turn out to be. They w
  • Eh? Trying to be hip is it. Why not 'agrees with', or even 'has the same findings as'.

    'Jives' is not a particularly useful term to use when describing financial dealings.

    [/mutter]
    • (The definition about being in accord or agreeing.)

      It's an easy typo... but a lot of people just don't realize those are two very different words.
    • 'Jives' is not a particularly useful term to use when describing financial dealings.

      Right, because of course, "jibe" is part of the Queen's English that they use in the world of finance!

      "Jive" can refer to "b:The jargon of jazz musicians and enthusiasts". It's not unreasonable to read it metaphorically to mean "is compatible with", since two people talking "jive" are compatible with each other. The first time I heard "jibes" I thought the person was saying "jives" for this very reason.

  • Apple shareholders have been raking it in. The stock is up about 28x in the last 4.5 years. If you had invested $50K in April of 2003 you'd be sitting on $1.43M today. A shareholder suing Apple for losing money? Maybe they meant that they didn't make all the money they could have if had not sold out early. What an ungrateful bunch!
    • Strictly speaking, only Apple shareholders who have owned the stock for that long made all that money. Those who bought in when they thought that the company was more profitable than it really was overpaid for it based on bad information.

      Not that I'm happy about these idiots. I really have owned stock for that long and any money the company spends fighting the lawsuit is really my money. But short-term share-holders really could be screwed by financial mis-reporting, and long-term shareholders depend on
  • Since Jobs came back to Apple, the company's revenues, share price and market cap have all risen dramatically. Anyone that invested in Apple when the future of the company was in doubt, when Jobs first arrived back in the 1990s, would have done quite handsomely by now. I wish I would have bought stock in the company back then.

    To argue that somehow Jobs did something to hurt Apple stock is ridiculous. I might just have to go out and buy a Mac in protest!
  • Suppose Jobs were guilty. Did it for his friends as he has plenty of $$$. He gets sent to jail and maybe has to leave Apple. Stock would tank and shareholders would be totally screwed. Now suppose you or I get caught shoplifting at an Apple store. We are stealing from Apple. Whoever in the company knowingly authorized the backdating should face criminal charges as they are stealing from Apple on a much larger scale. Why the company should be sued is beyond me. The expenses of the suit and payout will

  • If they're not happy with AAPL past two years' (Score:4, Funny)

    by jpellino (202698) on Friday November 16 2007, @01:30PM (#21380821)
    I'll take'em.

    • Your statement is so wrong and such a non-sequitor, that I assume you accidentally replied to the wrong article.

    • It's kind of like saying, "yeah, I know the perp broke into your house and stole your TV, but you were still able to buy a new DVD that year, so we really can't make him give the TV back."

      The complaint was that the backdating cost Apple shareholders money. In order to win, you actually have to prove that. Temporarily the price of Apple stock went down after the scandal but it has risen since then. Your analogy doesn't work because value might have been lost. Property was not lost.

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