Reuters reports that Apple executives have agreed to settle charges brought against them by a variety of shareholders in various lawsuits relating to the company issuing backdated options. These options had their prices set on a date prior to the one on which they were issued, which typically provides a built-in financial advantage – the options have a price below the market price on their actual issue date – and, while not illegal per se, must be disclosed and properly accounted for. (For the full account of how Apple got itself into all this trouble and has apparently sorted it out, see our series, “Apple’s Troubles with Backdated Stock Options.”)
A number of current and former Apple executives were named in the lawsuits, including Steve Jobs, former chief financial officer Fred Anderson, and former general counsel Nancy Heinen. Anderson and Heinen were singled out in an internal investigation Apple conducted into its own behavior – although they weren’t fingered by name – and both Anderson and Heinen settled separate actions with the SEC in which they neither admitted nor denied culpability. The company was never specifically charged with any civil or criminal actions.
Reuters says all the targets of these various lawsuits have agreed to a settlement, to which a judge has given preliminary approval, in which $14 million will be paid to Apple, which in turn will pay $9 million to plaintiffs to cover legal expenses. The settlement will be paid by Apple’s insurance provider.
The suits were filed on behalf of Apple by shareholders, and they aren’t sharing in the proceeds – which means Apple gets a $5 million rebate of sorts against their insurance premiums, and executives pay nothing. Plaintiffs can’t legally get a kickback on legal fees in these sorts of cases; the Justice Department successfully prosecuted several attorneys over the last few years involved in such schemes.