Getting Subpoenaed Does Not Make You a Target–Just Be Sure to Tell the Truth

By Startup Issues

As a former Securities and Exchange Commission legal clerk and a current Apple fanatic, the following story is of high interest:

Steve Jobs subpoenaed in backdating case

September 20 2007: 5:27 PM EDT

SAN JOSE, Calif. (AP) — Apple CEO Steve Jobs has been subpoenaed by the Securities and Exchange Commission to give a deposition in a stock-options backdating case against Apple’s former general counsel, a person familiar with the case told The Associated Press Thursday.

Jobs was subpoenaed as part of the discovery process in the SEC’s civil case against Nancy Heinen, according to the person, who spoke on the condition of anonymity because the case is ongoing.

Heinen is accused of fraudulent backdating and of altering company records to conceal the fraud.

The case, filed in April in the U.S. District Court of Northern California in San Jose, centers on two large options grants to Apple executives in 2001, including one to Jobs.

Jobs has not been charged by the SEC, and people familiar with the matter say the subpoenas do not indicate he is being targeted. He is being ordered to testify.

Heinen is fighting the SEC’s allegations that she modified documents to backdate the grant to Jobs to reflect that it had been approved during an October 2001 meeting that never occurred.

During the SEC investigation that led to the case against Heinen, Jobs was interviewed. Apple, which conducted a separate probe on the matter, cleared Jobs of any misconduct.

An Apple representative did not immediately return a call to comment.

The subpoena to Jobs was first reported by Bloomberg on Thursday.

Court records indicate the SEC issued a total of three subpoenas last month, and stated that one of them went to Heinen. The identity of the third recipient is unclear.

Marc Fagel, an assistant regional director of the SEC in San Francisco, confirmed that subpoenas were issued in the case but said he could not comment on who received them or why.

Additional subpoenas are expected, according to court records, but the two parties are still arguing over how many depositions should be allowed in the case.

In addition to Heinen, the SEC charged former Apple Chief Financial Officer Fred Anderson in connection with Apple’s backdating troubles. Anderson, however, immediately settled the case. Without acknowledging wrongdoing, he agreed to pay about $3.5 million in fines and penalties.

No trial date has been set. The SEC has proposed a trial date in September 2008. The defense proposes March 2009.

Shares of Apple (Charts, Fortune 500) closed down 0.3 percent in Thursday trade.

Link to Original Story Here

Even though Steve Jobs isn’t an official target, he must still comply with the subpoena and more importantly, tell the truth. I’m certain he is smart enough to figure that out and I’m even more sure his team of lawyers will get the message across.

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But unfortunately, some entrepreneurs view deception as a business asset rather than a liability. Whether distorting or omitting facts when raising money from outside investors or lying to their own employees, these entrepreneurs only harm their startup companies in the long run. And not to mention risk their own personal freedom.

During my brief time at the SEC, I witnessed several depositions. Most went smoothly (i.e., the subpoenaed person told the truth) but I vividly remember one person that lied throughout his entire deposition. Even after being confronted with damning emails he sent to investors, he continued to tell more lies which also conflicted with documents we had yet to reveal. His lying only made the air thicker and his punishment greater.

Don’t be that guy. Even if you look great in orange.


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