Friday, September 21, 2007

The Steve Jobs Subpoena: A Minefield

Apple's (APPL) CEO Steve Jobs has been subpoenaed to testify in a stock option backdating case brought by the SEC against Apple's former general counsel Nancy Heinen. Mr. Jobs and his lawyers will no doubt brush this news aside as "old news", but it is a perilous situation for him.

Jobs has danced around Apple's backdating mess, despite it being determined that he helped select the dates. Defenders have said he is innocent because he "didn't appreciate the accounting implications" of backdating. However, Apple's former CFO, Fred Anderson has said that Jobs misled him about board actions on stock option grants. This means that one of Jobs' former confidants is accusing him of lying on this issue. The company's official investigation pardoned him only because of his mindset about what he did (surprise!!!). It was the old "I did it but did not know it was wrong" excuse. Hard to believe it but it worked.

The subpoena creates a minefield for Jobs. Even though he is only a witness and not a target, the SEC's and Heinen's lawyers are sure to ask him questions that will require him to revisit previous statements and this time it will be under sworn testimony. I am guessing that the tone of the conversation this time will be a bit more contentious than the Apple "investigation" was.

Since Apple's defense of his conduct relies on the distinction between what he knew and thought, Jobs' testimony will be dissected for any discrepancies related to prior statements and what Heinen's lawyers believe to be the truth as told to them by their client.

The SEC is no doubt unhappy that a CEO was able to admit to backdating of options and still walk on the action. Does anyone think that this subpoena is not making them very happy to get more testimony from Jobs on the record?

Since Jobs is Apple and without him Apple is just another company, shareholders are going to want to keep close tabs on events here. It looks a bit to me like a set-up but, if Jobs is able to walk away from this unscathed, and he very well may, it will only serve to elevate his "God" like status in the cult that is Apple shareholders.

Either way, it will be interesting..


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