Pixar options reportedly under probe
Feds looking at '01 stock options that Apple's Steve Jobs approved for animation superstar John Lasseter, report says.
NEW YORK (CNNMoney.com) -- Apple Chairman and CEO Steve Jobs, whose company's stock-options practices are already the subject of a Securities and Exchange Commission probe, agreed to a large stock-options grant to a key filmmaker at his Pixar Animation Studios in 2001 as well, according to a published report.
The Wall Street Journal reports that the grant went to John Lasseter, who has been either executive producer or the writer-director of all of Pixar's string of seven blockbuster hit movies to date.
Federal prosecutors in San Francisco also are looking into Pixar options, the newspaper reported, and it is also the subject of an internal Disney probe.
The paper said that the options, part of Lasseter's 2001 employment contract, carried the lowest share price of the previous year - on a date more than three months before the employment contract was actually signed.
Pixar has since been purchased by media conglomerate Walt Disney (Charts), which placed Jobs on its board. The paper said that Disney declined to answer questions about the options other than to repeat an earlier statement by CEO Bob Iger in which he told investors in November that "we aren't aware of any basis under which stock options that were issued by Pixar would have a material impact on our financial statements."
The Journal said that Lasseter's early success as the writer and director of Pixar's first three hits, "Toy Story," "A Bug's Life," and "Toy Story 2," made him a superstar in the growing field of computer-generated animation, and that it was important for Pixar to lock him up to a long-term contract.
Disney, which was then Pixar's partner but also a competitor that was seeing weakness in its own hand-drawn animation offerings, had discussions with Lasseter about possibly hiring him, according to the paper.
The 2001 contract included a $5 million signing bonus, a $2.5 million annual salary and one million stock options. But the options weren't priced on the date of the contract, which the paper said Jobs signed on behalf of Pixar, at which he was also chairman and CEO as well as holding those titles at Apple.
Instead, the paper said options were dated Dec. 6, 2000, carrying a strike price of the stock's close the day before, which it said was the yearly low and was at the bottom of a months-long slide. The Journal reports that by the close of trading March 20, the day before the contract was signed, Pixar's shares had climbed 24 percent, increasing Lasseter's potential profit on the options by $6.4 million.
The Journal said that questions about the granting of those options were also raised by an unexplained delay in reporting the options to the SEC, well after the deadline if they had been granted in December, but just 49 days after the contract was signed in March 2001.
The Journal, citing SEC documents, reports that Lasseter exercised about 880,000 of those options and sold the shares, and converted the rest to Disney stock at the time of the company's sale in 2006.
Apple has said that Jobs has been cleared of wrongdoing by its internal probe of its options practices, but it admitted that Jobs was aware that some stock options granted to him and other executives at Apple between 1997 and 2002 were backdated.
The company has had to take after-tax charges of $84 million to reflect stock-based compensation expenses for the backdated options.
There is a risk for Apple if the scandal were to force Jobs to give up the top spot at the computer company he co-founded, and is credited with reviving once he returned to the top posts in July 1997, back when Apple was a struggling company that was losing money.
Among the companies that have seen their CEO leave amid a growing scandal over stock options are tech firms such as Comverse Technology (Charts) and McAfee (Charts) as well as non-tech companies such as UnitedHealth Group (Charts) and KB Home (Charts).