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US probes Apple stock option irregularities

Federal prosecutors confirmed they have opened an investigation into stock options irregularities at Apple Inc.

The US Attorney's Office in San Francisco acknowledged for the first time on Friday that it was investigating Apple's handling of stock options awards given to executives and other employees even though the company has cleared CEO Steve Jobs and all current management of any wrongdoing in the accounting shenanigans that resulted in thousands of mishandled grants. A spokesman declined to release further details of the probe.

The announcement came the same day it was revealed that federal investigators were examining one award in particular to Jobs as part of the wider probe and were looking to question a former Apple lawyer who was in charge of stock-options administration.

Federal authorities were looking into the circumstances surrounding an award granted to Jobs for options on 7.5 million shares, an award that carried a false October 2001 date when it was actually approved in December of that year, a person close to the investigation said. The person requested anonymity because the investigation is ongoing.

The Wall Street Journal first reported the development on Friday, citing anonymous sources.

The Journal also reported that investigators with the US Attorney's Office and the Securities and Exchange Commission were trying to question a former Apple lawyer, Wendy Howell, who was in charge of stock-options administration and was quietly dismissed last month.

Howell was believed to have falsified documents related to Jobs' grant, the Journal reported, citing the anonymous sources. Her lawyer, Thomas Carlucci, did not return a phone calls on Friday.

Apple has said that the internal probe that exonerated Jobs and other current management also revealed "serious concerns" about the actions of two former Apple employees in connection with improperly accounted stock options grants. Those people are reportedly Fred Anderson, the former chief financial officer and Nancy Heinen, former general counsel.

Defense lawyers for Anderson and Heinen have both said their clients did not knowingly participate in any manipulation of the awards.

The latest revelations about the federal probe ratcheted up the pressure on Jobs and Apple at one of the most prosperous times for the company and raised further questions about Jobs' future.

Apple's stock was trading at all-time highs last week after Jobs unveiled one of company's most important and widely hyped product in years -- the iPhone.

Jobs' introduction of the multimedia gadget led to a federal trademark-infringement lawsuit from Cisco Systems Inc, which has owned the trademark on the name "iPhone" since 2000 and began shipping its own line of iPhone-branded Internet-enabled phones in spring last year.

Though the lawsuit could wind up costing Apple millions of dollars and possibly the loss of the iPhone name, investors and analysts have cheered Apple's announcement of the sleek iPod-cellular phone combination.

Investors sent the company's stock to a high of US$97.80 on Thursday, creating more than US$10 billion in additional shareholder wealth at the stock's peak, compared to its price before the announcement.

Charles Golvin, principal analyst with Forrester Research Inc, said investors and consumers want Jobs to stay with the company. It would likely take a dramatic turn such as criminal charges against Jobs or evidence of deep involvement in any manipulation to cause his ouster, Golvin said.

"The market has spoken -- the market wants Steve Jobs to be the head of Apple," Golvin said. "They are more concerned about the loss of him as the leader of the company than they are about any options manipulation or anything like that."
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