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Investigation could be sour for Apple

Janet Babin Dec 27, 2006

BOB MOON: Apple Computer has been reaping record profits in recent years, thanks to the ubiquitous iPod and all the iTunes downloads it’s been selling. But the company’s fate could turn on a deepening scandal over stock options and a report today that company officials went so far as to falsify documents.

Apple shares suffered a 5 percent jolt early today, though they recovered most of that loss by the close. Janet Babin has more from the Marketplace Innovations Desk at North Carolina Public Radio.

JANET BABIN: The article appeared in the Recorder, a San Francisco-based legal daily. Reporter Justin Scheck wrote the piece. He says federal prosecutors are looking into whether Apple officials falsified stock option documents to maximize payouts.

Scheck says it’s one thing for a company to have late filings or sloppy paperwork concerning stock options:

JUSTIN SCHECK: But if there’s falsified documents and evidence of intentional alteration of paperwork, that could indicate intent to defraud, which would bring this into the criminal realm.

The company’s own investigation of its backdating issues was filed in October. It found that two former executives were responsible for certain problems, and said no current employees were involved.

But Scheck reports that Apple’s CEO Steve Jobs has hired his own personal counsel to deal with the Justice Department inquiry.

Lawyer Aileen Leventon with QLex Consulting says sometimes just allegations of wrongdoing are enough to force out a CEO:

AILEEN LEVENTON: There comes a point where, defending yourself, even if you’ve done nothing wrong, can be so time-consuming and distracting that you have to step down.

But that’s hardly an option for Jobs because Apple’s success seems so inextricably bound to his iconic presence.

Apple’s Steve Dowling says the company is providing all details to the Securities and Exchange Commission, but is not commenting beyond that. More information about the issue could come out when Apple files its annual report this Friday.

I’m Janet Babin for Marketplace.

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