Apple's former general counsel, Nancy Heinen, settled a year-old civil suit Thursday involving backdating of stock options for key executives. Heinen agreed to $2.2 million in restitution, interest and fines and stipulated she would take no job in a publicly traded company for five years.

The Securities and Exchange Commission also barred her from practicing security law for three years. Among the recipients of backdated options was Apple CEO Steve Jobs.

What Happened

Options with an earlier date can vest more quickly and have greater value relative to a company's current stock price. The option price is the actual price of shares on the grant date. So backdated options were worth far more than if the price had been set after Apple's stock rose.

Some financial estimates place the loss to shareholders at close to $40 million. An Apple internal investigation and audit absolved most of the executive suite, except Heinen and former Chief Financial Officer Fred Anderson. SEC investigators agreed that no other Apple executives were at fault.

Anderson settled with the SEC shortly after the charges were filed in April 2007. In his defense, Anderson says he warned Jobs about the illegal backdating but was assured it had been approved by the board of directors.

Backdating is not illegal if it is publicly disclosed, properly documented in financial records, and approved by the board of directors. The SEC found that Heinen may have tampered with documents and created documents to make it appear that the board had approved the backdating.

The charges stem from Heinen allegedly backdating 4.8 million shares of stock to February 2001 for herself and other top executives and more than seven million shares for Steve Jobs to December 2001.

No Admission of Guilt

Heinen wasn't required to admit guilt in the settlement. Her attorney, Miles Ehrlich, said, "This isn't an admission -- it's an admission that life is short," according to a report in The Wall Street Journal. "And rather than spend her energy fighting a lawsuit without end, she decided she'd rather devote her talents and time to making positive change in our society."

In a statement released to the public, Heinen said, "I cherish the great people I worked with at Apple, and I am proud of my contributions to its historic turnaround and current success. With this lawsuit behind me, I look forward to addressing the greater challenges of social justice and economic disparity."

Well more than one hundred U.S. companies have come under scrutiny for this practice over the past decade. In a high-stakes case in May 2007, William Sorin of Comverse Technology was sentenced to more than a year in prison for backdating options. Sorin was also ordered to pay more than $50 million in restitution.

More recently, Marvell Technology Group -- a chip-fabrication company based in Santa Clara, Calif. -- was hit with a $10 million fine but no jail time for any executives.

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