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It was not a scandal, it was the IRS getting weird on companies that gave benefits to its employees.What the IRS did was to suddenly decide all by itself, without warning, that any Stock Options that companies gave to employees (as an incentive to attract the best employees) had to be taxed heavily.Such practices are frowned upon by the Securities and Exchange Commission.Apple's practice of backdating stock options began in 1997 and continued into January 2002.For instance, after selling Ne Xt to Apple in 1997, his initial reason for acting as a consultant was to get “some of the Ne Xt people into some jobs where they could help Apple.” He himself was reluctant at first to take on the CEO role at Apple because he didn’t want the people at his other company, Pixar, to “think I was abandoning them.” Then when it came time to reward his “ultra key” executives with one million options each, two of them were from Ne XT. Q: Okay, Did the board in fact fire [Gil Amelio] the following week? While he was taking care of his top lieutenants by trying ti “surprise and delight them with what a career at Apple could be”, he was “hurt” that Apple’s board didn’t do the same for him. The companies would all give the option to the employee to buy the company stock at an advantageous price, usually the lowest price within the year that the employee was hired.The employee did not have to actually pay for the stock until much later (years later).
I’ve excerpted some of the juicier bits from the deposition below. On coming back to Apple and becoming CEO in 1997: Q: And I guess, just to go back in time then, I want to just try to understand a little bit the transition from having the title consultant to becoming CEO. A: Well, when Apple bought Ne XT, Apple was pretty messed up.
The deposition was never made public until Forbes published it on Friday, after obtaining it through a Freedom of Information Act request.
(Full deposition embedded below) Jobs explains his reasoning for why he asked the board for mega grants of options for both himself and his top executives, but claims ignorance of the mechanics of how that was done after the board approved the grants themselves.
The company says that 15 stock option grants during that time period appear to have been backdated, but that no members of Apple's "current management team" engaged in any misconduct around the options.
However, Apple says there are "serious concerns" surrounding actions taken by two former officers in connection to the problems.