SAN JOSE, Calif. – The pending resignation of UnitedHealth Group’s Chairman and Chief Executive William McGuire provided an inescapable sign that no executive is too big to be toppled by the stock option scandal – despite having many fans in the boardroom and on Wall Street.

That news also could rekindle a question: Is Apple Computer’s iconic CEO Steve Jobs truly safe?

“I don’t think there is anybody who is too big, too important or too rich to go to jail. That applies to Steve Jobs as well,” said Paul Hodgson Sr., a senior researcher for the Corporate Library. “If he has done something wrong, he has got to go, regardless of the situation.”

But, Hodgson added, “I haven’t seen enough evidence either way that Jobs is involved or completely uninvolved in this situation.”

Trading on Wall Street suggests investors believe Jobs will weather this crisis. After tumbling as low as $50.67 in mid-July, Apple’s stock is up nearly 50 percent.

So far, the widening national scandal into whether companies rigged stock options to give executives and employees a head start to profits has entangled at least 140 companies, including dozens in Silicon Valley.

This week, four more Bay Area executives lost their jobs amid scandal. Altera Chief Financial Officer Nathan Sarkisian resigned. Meanwhile, KLA-Tencor pushed out Director Kenneth L. Schroeder, who had once served as CEO, and General Counsel Stuart J. Nichols. Kenneth Levy stepped down as chairman of KLA-Tencor on Tuesday.

But UnitedHealth’s McGuire is the biggest head to roll in corporate America during the scandal so far. Under McGuire’s guidance, the Minnesota company’s stock climbed more than 50-fold, performance that some investors hoped would insulate him from the scandal.

Like McGuire, Jobs is seen as an integral part of Apple – the visionary and image-maker who rebuilt Apple into Silicon Valley’s fourth-biggest company. Barely two weeks ago, Wall Street analysts sighed with relief when Apple disclosed that an ongoing internal review had concluded that Jobs was “aware of” stock options abuses but didn’t do anything that would force him out.

The Cupertino, Calif., company said Oct. 4 that it found “no misconduct” by current managers, but it did point the finger at two unidentified former executives. Jobs also apologized for the abuses that “happened on my watch” but were “completely out of character for Apple.”

Apple’s terse and vague disclosure left many unanswered questions about Jobs’ role and the tainted options he received. Some experts have challenged the company’s spin that “he did not benefit” from tainted options he received, triggering one critic to call for Jobs to cough up $85 million of income. Shareholders could ferret out evidence they could use against Apple in court.

And still looming is the worry that federal investigators could reach darker conclusions about Jobs’ role than the company itself, experts say.

Jonathan Moreland, director of research for InsiderInsights.com, said Apple failed to relieve his anxiety.

“How many people feel relieved when they find out they have a tumor?” he asked. “You only feel relieved when you find out that the tumor is benign or at least treatable.”

Anxiety about whether Jobs’ fate has been simmering for months. In late June, Apple disclosed that its internal review had uncovered “irregularities” in the prices of options granted to Jobs and others.

Though Apple has yet to detail which of Jobs’ two grants were tainted, most of the suspicion has centered on one of the largest grants in U.S. corporate history: 40 million options, adjusting for splits in the stock price, in January 2000. If Jobs’ grant had been pegged to the price on the day he was appointed permanent CEO – rather than a week later when Apple’s stock hit a monthly low – his immediate paper profit on the options would have been $168 million less.

A month after Apple’s initial warning, the company said it probably would have to restate profits since fall 2002, news that sent its stock tumbling 8.6 percent in the next few days. Days later, media reports also spotlighted suspicious options grants made under Jobs’ watch to top executives at the Pixar animation studio, which was sold to Disney in May.

Apple’s former general counsel Nancy R. Heinen also reportedly has retained criminal defense lawyers since she stepped down in May.

Former Securities and Exchange Commission Chairman Harvey L. Pitt complimented Apple’s disclosure Oct. 4 from a “big-picture point of view,” saying it quelled much of the uncertainty for investors grappling with how to price the stock.


“They had come to terms with two of the most important issues shareholders wanted to know: Did he know of any of this? And did he benefit from any of it?” said Pitt, founder and CEO of Kalorama Partners, a consulting firm in New York. “Or put another way: Do I think his tenure is in jeopardy?”

Still, Pitt said he could see how investors, analysts, shareholder attorneys and corporate governance experts might still be uncertain about many missing details. And he bristles at the idea that lawyers and image-makers withhold information that investors need to know.

“Most people look at disclosure as, “What do we have to say?’ Sometimes they look at, “How little can we get away with saying?’ And sometimes they say, “How can we word it so it’s accurate but not necessarily as fully flavored as it should be?’

“Those,” Pitt said, “are bad decisions.”

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(c) 2006, San Jose Mercury News (San Jose, Calif.).

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Distributed by McClatchy-Tribune Information Services.

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