Amid SEC charges that Apple management had shifted the dates of stock options to benefit executives, including Jobs, Anderson, and former general counsel Nancy Heinen, the company took an $84 million charge in 2006. Jobs and Apple settled a shareholder lawsuit for $14 million, but avoided trouble with the SEC. Anderson and Heinen paid $3.5 million and $2.2 million in fines respectively, without admitting guilt.

The episode caused a major rift between Anderson and Jobs. Anderson had left Apple in 2004, but stayed on the board until the scandal led to his resignation in 2006. In the meantime, Anderson had joined Elevation Partners, a private-equity firm in Silicon Valley. As the stock-options scandal grew, Anderson and Jobs pointed fingers at each other, at one point issuing dueling press releases shifting the blame. Anderson has long maintained that Jobs knew more about the options chicanery than he has let on.

Elevation, which also counts famed Valley investor Roger McNamee and U2 frontman Bono as partners, backed Palm, a rival to Apple in the smartphone business, and recruited a former top Apple executive, Jon Rubinstein, as Palm's executive chairman. No one in Silicon Valley honestly believes this is a coincidence.

Forbes is another Elevation investment. The May 11 story, written by Bill Barrett and teased on the cover, centers on the 118-page transcript of a three-hour interview Jobs gave SEC examiners trying a case against former Apple general counsel Nancy Heinen, which the magazine obtained at some difficulty through a Freedom of Information Act. In the interview with SEC examiners, Jobs complained that the board was not looking out for him and he had to ask for a generous stock-options package, but maintained that he was largely unaware of the backdating and ignorant of the accounting consequences. (Backdating is not illegal by itself, but requires notice to shareholders and a charge to earnings, neither of which Apple undertook at the time it backdated options.)

Excellent journalistic work on Barrett's part. But here's the question: How did Forbes know precisely which document to ask for? It always helps to have well-connected sources. And it's hard to imagine who would be better placed to know the details of the case than Anderson.

Above the Law notes that Wilson Sonsini Goodrich & Rosati has skipped the annual tradition of awarding associates who passed the bar exam a bottle of champagne. At $40 a bottle for 53 associates, $2,120 is hardly a big expense. But it is a powerful symbolic move: The bubbly times are gone for good.

Wilson Sonsini is no mere bill-by-the-hour outfit; the firm and its founders have been key players in establishing Silicon Valley's equity culture, where employees are motivated by stock options that pay off when a company goes public or gets sold. And who handled many of those IPOs and M&A deals? Wilson Sonsini, of course. Larry Sonsini, the firm's best-known founder, has been a consigliere to Apple CEO Steve Jobs and Google CEO Eric Schmidt, among others.

This decade has not been good for Wilson Sonsini. The firm has found itself dragged into every major scandal that drew national attention to the clubby world of the Valley, from HP's illegal pretexting of reporters' phone records to the backdating of stock options in many tech firms. Wilson Sonsini paid $9.5 million to one tech company to avoid involvement in litigation — but there are other backdating lawsuits out there. Observers of the legal profession are waiting to see if one ends up dragging the Valley's most arrogant lawyers into court.

Even if Wilson Sonsini escapes legal trouble, it can't dodge the recession. A cold IPO market has already hobbled its business; with public offerings completely frozen, and acquisitions happening for a fraction of the price they commanded even a few years ago, it's hard to see how the firm will make the kind of money it did in the '90s.

Wilson Sonsini helped build the Valley's sense of itself as a world apart — and its own firm as an even more rarefied sphere within that bubble. No wonder they and their clients ended up testing the law's gray areas in the pursuit of . That's why trimming this year's champagne budget isn't a mere cutting of perks: It's a sign that a gang of lawyers who saw themselves as above the rest have floated down to earth. The descent is only beginning.

In August, before the markets started to melt down and with Facebook worth $15 billion on paper, Zuckerberg unveiled a plan to let employees sell a small amount of their shares — no more than $900,000 or 20 percent of their stock holdings, whichever was less. The program, all but unheard of among Valley startups, was meant to appease employees who were agitating for some chance to make money from their shares. It was a revolutionary new way to reward employees, without having to go through an IPO or a sale.

The revolution is over, Zuckerberg told his company today. "I'm writing this note to let you know some bad news," he wrote in an email to all employees at the 800-person social-network startup this afternoon. "Despite a lot of work, we have not been able to finalize a plan for the employee stock sale we announced in August."

Facebook executives had been courting potential buyers for employees' shares since the summer. But as the value of Google tumbled from its high of $700 last year, would-be investors started asking questions about whether Facebook's value, too, had dropped. By last month, they were getting downright nervous.

Microsoft had invested $240 million in the company for a 1.6 percent stake in the company that valued all of Facebook at $15 billion, but that deal came with extras: Microsoft bought preferred shares, which get paid off first if the company's bought, and it also got an advertising deal with Facebook at the same time.

Facebook's common shares, meanwhile, have a value that put the whole company's worth at around $4 billion. Or they did. A source close to potential investors said they wanted to buy shares from employees at a lower valuation, or with guarantees similar to Microsoft's. To reward a small number of employees who had enough shares to benefit from the program, Zuckerberg would have had to give away something for nothing.

It's still a crushing blow to morale at the company that was once Silicon Valley's highest-flying startup. Facebook once had the pick of the world's best and brightest, hiring brilliant kids from college who had gone through school addicted to the social network.

So Zuckerberg's back to the original startup business plan: Make a big bet, and hope it pays off years later with an IPO or a sale. Facebookers will have to make the same bet, too. It's not as exciting as overturning Silicon Valley's financial order. But right now, just drawing a paycheck seems like a lucky thing.

It's not for lack of trying. Silicon Valley's stock-options millionaire make money by getting the right to buy shares at a low price and selling them for a higher one. Facebook's soaring valuation — Microsoft invested $240 million for a tiny stake, in a deal which valued all of Facebook at $15 billion — threatened to undo that equation. How is Facebook supposed to soar past $15 billion in value? So Zuckerberg & Co. turned to issuing restricted stock units, or RSUs, instead. (Restricted stock units are common at large companies like Google and Microsoft, but unusual for a company Facebook's size and age.)

The restricted-stock plan has created a new complication: Once it has more than 500 RSU holders, SEC regulations may require Facebook to start publishing its financials, even if it doesn't conduct an initial public offering. Facebook's revenues still aren't pretty enough for public exposure.

Facebook's lawyers have sought, and obtained, an exemption. Part of the argument they made is that issuing RSUs won't create a market in Facebook shares.

Facebook, unusually for most of Silicon Valley's private companies, has not had many restrictions on what employees and other shareholders could do with the shares they own. Most have rules that force shareholders to offer shares to the company first — a right of first refusal — or outright prohibitions on unauthorized sales.

But the letter Facebook sent to the SEC says that even when the stock units convert to common shares, they have limits on their sale: "... the Plan has been structured to preclude any trading of RSUs or any interest therein from developing." Even if Facebook permits an employee convert their stock units to shares and sell them, the company can then prevent the buyer from selling.

Employees at Facebook — especially the early ones, whose holdings are now substantial — have been agitating for some time to sell their shares, and there are still, even with the public markets taking a beating, interested buyers. Zuckerberg finally bowed to this pressure and set up a program, now underway, to let employees cash out up to $900,000 in shares. (Note the symbolism of the figure: No one will become a millionaire.)

But that may be it. If Facebook extends its stock-sale restrictions to common shares, not just the restricted-stock units, both employees and the investors so eager to snap up their shares will be stuck, until Facebook sells out or goes public. Zuckerberg has made it clear he thinks both of those events are far off — and the 24-year-old CEO still owns 27 percent of the company and more or less controls the board.

It's a dicey gamble. The prospect of selling Facebook shares privately must surely have attracted some employees who counted on a relatively quick cash-out. But shutting down the prospect of further stock sales will make sure the Facebookers who remain will be more committed to the company for the long haul.

Zuckerberg doesn't have much choice. As long as Facebook employees can find buyers for their shares, they'll be tempted to leave rather than stay at a company going through a tumultous adolescence.

Already, the company has had far more turnover, from bottom to top, than Google did. Not a single high-ranking exec left Google for the first six years of its existence. Facebook has lost three of its four cofounders, and numerous people underneath them, from former COO Owen Van Natta on down. No wonder Zuckerberg wants to slam the exit door closed.

The phrase Vesting in Peace, which means you work for stable company increasing in value, and you’re doing as little as possible until your stock options are worth something — just enough to be perceived as functional, but never to the point of exertion.

Klein gets this mostly right, though he fails to note where it most frequently happens: At startups after they're acquired. Most of the original YouTubers, for example, are only at Google because they're still vesting in peace.

(Photo by sfllaw)

The defendants knew that options were not granted on the dates that were disclosed to shareholders and falsified the company's records to create the appearance of illegality, and thus bear direct responsibility for their actions.

A previous suit was dismissed because the actions by Apple directors and executives in 2000 and 2001 were too old for courts to consider. We're not sure yet what's so different about this case, except that it's well-timed for bad publicity ahead of the iPhone 3G launch.(Photo by AP/Paul Sakuma)

Samueli, pictured above in his role as owner of NHL's Anaheim Ducks, denied any wrongdoing in a statement. Nicholas could not be reached as he is reportedly now at the posh Betty Ford clinic undergoing rehabilitation for substance abuse. The suit also names former CFO William Ruehle and current general counsel David Dull, seeking a return to shareholders of "ill-gotten gains" and to bar all four principals from serving in any public company. (Photo by AP/Lawrence Jackson)

Here's what's odd: Pixar is now owned by Disney, which cleared everyone "currently associated" with the company of wrongdoing. That includes Steve Jobs, Pixar's former CEO, now a Disney board member, but leaves Mather out in the cold. So far out that Disney itself hasn't disclosed her legal jeopardy to its own shareholders — the people whose Mather's Pixar backdating most affected.