SAN JOSE, Calif. (CN) - A federal judge approved a $16.5 million agreement Wednesday to settle class action shareholder claims that Apple Inc. and several executives and board members backdated employee stock options for more than a decade and issued false and misleading financial statements.
The New York City Employee Retirement System based its claims on a series of announcements and a corrective disclosure made by Apple regarding its issuance of stock option grants.
"The grants were frequently dated just after a sharp drop in the Company's stock price and before a substantial rise in the Company's stock price," according to the complaint filed in August 2006 in the Northern District of California.
"This extraordinary pattern of stock option grants demonstrates that the purported grant dates were not the actual dates on which the stock option grants were made. Rather, defendants improperly backdated the stock option grants to make it appear as though the grants were made on dates when the market price of Apple's stock was lower than the market price of the actual grant dates," the complaint said.
U.S. District Court Judge Jeremy Fogel's order puts an end to litigation lasting more than four years. "The parties attest that this action would have continued for years and that its outcome would have been uncertain had they not reached a settlement," the order reads.
Shareholders of record at the time of the backdating stand to recover up to $1.70 per share.
The agreement also provides that any amount remaining in the settlement fund after distribution to the class will be donated to nine university corporate governance programs.
The pension fund's attorneys were granted their requested fees of $1.9 million, which, Fogel says in the order, "is well below the Ninth Circuit's benchmark of 25% of the recovery for the class in common fund cases."
Though objector Patrick Pezzati's lawyers sought a $297,000 fee award, they will walk away with $87,000 and an incentive payment of $1,000, which Fogel concludes "fairly will compensate Pezzati and his counsel for their contributions to this litigation."
Notice of the proposed agreement has been mailed to more than 1.3 million individuals, 31,886 record holders, and 5,802 bankers, brokers, and other nominees who may hold shares for potential class members.
Plaintiff New York City Employee Retirement System's lead attorney is Charles Caliendo of Grant & Eisenhofer in New York.
Apple Inc. is represented by Diane M. Doolittle of Quinn, Emanuel, Urquhart & Sullivan in Redwood Shores, Calif.
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