Apple Admits Board Minutes Were Falsified Over Jobs Options

Apple Computer yesterday admitted that records of the board meeting that handed chief executive Steve Jobs 7.5m share options were fabricated. But the independent committee investigating the illicit backdating of stock awards cleared Mr Jobs of wrongdoing.

Apple shares have been depressed during the week on fears that the company's annual report, which was delayed by the options investigation, would contain new information which might damage Mr Jobs's position. In its report published yesterday Apple reiterated the independent committee's findings from October that, while Mr Jobs "was aware or recommended the selection of some favourable grant dates, he did not receive or financially benefit from these grants or appreciate the accounting implications".

In a separate statement, the chairman of the special investigative committee, former presidential candidate Al Gore, and the head of Apple's audit and finance committee, Jerome York, said: "The board of directors is confident that the company has corrected the problems that led to the restatement, and it has complete confidence in Steve Jobs and the senior management team."

Apple is one of more than 160 US firms that have come under scrutiny for backdating stock or share options. The scandal of backdating, by which the exercise price of share options was set with the benefit of hindsight at favourable levels, has already led to the exit of several senior executives. Apple said yesterday that the mis-dating of 6,428 different share options packages awarded on 42 dates between 1997 and 2002 has cost it $105m (£53m) on a pre-tax basis.

Two option grants to Mr Jobs were scrutinised by the committee, which has handed its findings to the securities and exchange commission. While there was nothing untoward about the grant of 10m options on 12 January 2000, the paperwork governing a second tranche - of 7.5m granted on October 19 2001 - had been falsified.

The approval for the second grant of options "was improperly recorded as occurring at a special board meeting on October 19, 2001. Such a special board meeting did not occur," Apple said in its annual report. "There was no evidence, however, that any current member of management was aware of this irregularity."

The 7.5m options were given an exercise price of $18.03 on October 19 but they should actually have been dated December 18 at which time Apple's shares were trading at $21.01.

In fact both sets of options were cancelled in March 2003 before they were exercised. Apple said in its report the committee's investigation "raised serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock options". It did not name the two people.