Thursday, November 15, 2007, 12:00 pm
Judge dismisses shareholder backdating suit against Apple execsA California judge on Wednesday granted Apple's motion for dismissal in a stock options backdating lawsuit brought against chief executive Steve Jobs and thirteen other current and former members of the company's leadership, but is allowing the investors to refile an amended complaint as part of a derivative suit.
The New York City Employees' Retirement System, acting as the lead plaintiff in the case originally filed in August of last year, alleged that Apple's issuance of 200 million improperly accounted for shares to executives and directors unjustly diluted the company's stock price.
However, as U.S. District Judge Jeremy Fogel of San Jose noted in his ruling, the retirement board acknowledged that Apple's stock price didn't fall as a result of the backdating, which is somewhat of a prerequisite for most shareholder claims against corporations in similar matters.
"[As] Defendants note, such dilution is not necessarily accompanied by economic loss in the form of a fall in the stock price. For example, a companys stock might soar if it were to announce that it had secured the services of a leading executive by granting the executive a large number of options," he wrote. "While the subsequent disclosure that the options were backdated might require a restatement, without a discernible drop in the stock price there is no basis upon which to establish an injury to shareholders."
Apple said last year that its internal investigation into the company's backdating fiasco turned up 6,428 misdated stock-option grants issued between 1997 and 2002. However, it cleared Jobs and all other company executives of any wrongdoing, with the exception of former chief financial officer Fred Anderson and former general counsel Nancy Heinen. Both executives had since resigned from their posts at the company, with Anderson later settling with the SEC and Heinen going on to face federal charges in a case that is still pending.
In dismissing the retirement board's case against Apple Wednesday, Judge Fogel did so with leave to amend, meaning the board can refile in an attempt to establish that its claims are derivative if the organization can show that it has suffered an injury that is not dependent on an injury to Apple as a company.
"However, any derivative claims on behalf of Apple arising from the facts alleged in the Complaint likely would be subject to consolidation with the pending derivative action, In re Apple Computer Inc. Derivative Litig., Case No. C 06-4128 JF," Fogel added.
The judge explained that should any such amended complaint prove futile, the Court may order dismissal with prejudice.
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