The "Apple rule" takes shape

It's become clear by now that a major job for our legal system is trying to figure out a way that we can simultaneously (1) punish those greedy backdating wrongdoers; and (2) keep Steve Jobs out of jail.  It's getting harder.

According to the WSJ, linked by Law Blog, a criminal probe into Monster backdating is focusing on former gc Olesnyckyj's emails in which, according to the article, he "indicated his understanding of the accounting rules and how grants should be properly handled," and "discussed 'the finessing' of outside auditors."

As I've noted, the Apple investigation said "Jobs signed a disclosure statement on Aug. 8, 2002 with the false price and date."

Suppose it is shown that Jobs knew of the misrepresentations? Not unlikely, since he supposedly had been intensively negotiating his option package. Does he have to also know that it's a violation of some rule or other to lie? Or can he assume that there's a "lying is ok" doctrine in accounting and law? What if Jobs had no idea what the price and date were when he signed the disclosure statement representing, in effect, that he did?

Bottom line: Should criminal liability rest on these distinctions? Should it include a "successful executive" doctrine?  Or will the backdating "scandal" finally force us to face the fact that criminalizing agency costs doesn't work?

Comments

[Tim Worstall]

Not sure I get the point here. There's nothing illegal about backdating options grants.
The error comes in how they are accounted for and taxed. If the backdating means that they are in the money (which would be the point) then that amount must be reported as income, taxed as such, and pass through to the P&L as such.
That's where the illegality (alleged) is that this didn't happen, not in backdating options