Apple faces class action claim as options row pressures GCs
Computer giant Apple is facing a major class action in the latest episode of the backdating share options scandal that has hit more than 150 US companies and an unprecedented number of corporate counsel.The New York City Employees Retirement System pension scheme, which holds $90m (£45m) worth of shares in Apple, was last week appointed as the lead claimant in a class action. The shareholders are demanding compensation for what they allege were illegally-issued stock options.
January 25, 2007 at 02:23 AM
3 minute read
Computer giant Apple is facing a major class action in the latest episode of the backdating share options scandal that has hit more than 150 US companies and an unprecedented number of corporate counsel.
The New York City Employees Retirement System pension scheme, which holds $90m (£45m) worth of shares in Apple, was last week appointed as the lead claimant in a class action. The shareholders are demanding compensation for what they allege were illegally-issued stock options.
The news marks the latest in a string of scandals to have hit US companies following last summer's launch of an investigation by the Securities and Exchange Commission (SEC). Corporate counsel have been particularly hard hit by the growing scandal and Apple general counsel, Nancy Heinen, resigned from her role last year.
The SEC has scrutinised the role general counsel had to play in executive compensation schemes that granted share options. In many cases, in-house lawyers, were involved in the creation of such schemes.
Silicon Valley technology companies have been among the hardest hit by the scandal due to the popularity of such schemes during the dotcom boom.
High-profile general counsel to have been dismissed from their roles as a result of the scandal include Myron Olesnyckyj at Monster and McAfee's Kent Roberts.
Sharon le Duy at CNET and Hewlett-Packard's Ann Baskins also resigned from their positions as general counsel last year and have since been connected to backdating investigations.
In addition, the general counsel at software company Comverse, William Sorin, has become the first lawyer to plead guilty to criminal charges relating to backdating share options. He was fined $3m (£1.5m) and could face up to five years in jail.
Susan Hackett, general counsel for the Association for Corporate Counsel, said: "In the past, the SEC was averse to suing lawyers, now they are as likely to be prosecuted as company executives."
She added that the mounting scandal is likely to make in-house lawyers more attuned to compensation issues, which they did not traditionally feel was in their remit.
The practice of backdating stock options allows employees to buy a share in the company's stock in the future at a set price. While this practice is in itself legal, improperly disclosed backdated options can falsely inflate corporate profits.
United Technologies associate general counsel Larry Mowell said the current scandal could have a positive effect in the long term: "As a result of this scandal, law departments in Silicon Valley will become stronger and it will ensure that management seeks legal advice."
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