http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aDL78iMCdOzk
Apparently for lying about Steve Jobs’ health in an attempt to keep stock prices high…
what are the potential ramifications of something like this?
Apple Disclosures About Jobs Said to Face SEC Review (Update3)
Email | Print | A A ABy David Scheer and Connie Guglielmo
Jan. 21 (Bloomberg) – Apple Inc. faces a government review of its disclosures about Chief Executive Officer Steve Jobs’s health problems to ensure investors weren’t misled, a person familiar with the matter said.
The Securities and Exchange Commission’s review doesn’t mean investigators have seen evidence of wrongdoing, the person said, declining to be identified because the inquiry isn’t public. Bloomberg News reported last week that Jobs is considering a liver transplant as a result of complications after treatment for cancer, citing people who are monitoring his illness.
Investors have been pressing for information on Jobs’s health since June, when he appeared thinner at an Apple event. The company’s stock whipsawed this month after Jobs, who battled pancreatic cancer in 2004, said he would remain CEO while seeking a “relatively simple” treatment for a nutritional ailment. Nine days later, Jobs said he would take a five-month medical leave after learning his health issues were “more complex.”
“The good news flipped by the bad news makes one wonder what Apple knew,” said James Cox, a law professor at Duke University in Durham, North Carolina. “It’s not surprising for the SEC to come in and look afterward, given the pressure and publicity regarding their handling of a lot of cases,” such as criticism of the SEC’s response to Bernard Madoff’s alleged $50 billion Ponzi scheme.
SEC spokesman John Nester declined to comment on the Apple inquiry. Steve Dowling, a spokesman for the Cupertino, California-based company, also declined to comment.
Quarterly Results
Apple will report first-quarter earnings after the market closes today, followed by a conference call at 5 p.m. New York time.
To bring any case, the SEC would probably have to show the company tried to benefit by withholding information about an unambiguous diagnosis, said Peter Henning, a former federal prosecutor and SEC lawyer who now teaches at Wayne State University Law School in Detroit.
“It would be difficult, and certainly a new area of the law,” Henning said. “You would have to pin down exactly what they knew, and with a health issue – unlike a merger or a decline in revenue – it’s not subject to definitive answers.”
Medical Leave
Before today, Apple stock had dropped 8.4 percent since the company disclosed Jan. 14 that Jobs, 53, would be on medical leave through June. The shares added $2.37, or 3 percent, to $80.57 in Nasdaq Stock Market trading at 1:50 p.m. New York time.
Apple has declined to provide specifics of the illness, and Jobs said he won’t comment further about his health. “Why don’t you guys leave me alone – why is this important?” he said in a telephone interview with Bloomberg News on Jan. 16.
Apple’s disclosures about Jobs’s health have frustrated investors, who have watched the stock sink with each new rumor about his condition. Jobs said Jan. 5 that he decided to comment on his health after his decision to skip the Macworld conference, after 11 straight years of appearances, “set off another flurry of rumors about my health, with some even publishing stories of me on my deathbed.”
“The company has used him and made him a public figure to increase the value of Apple,” said John Dienhart, who holds the Frank Shrontz Chair for Professional Ethics at Seattle University. “If you take the good from that, then you have to take the bad.”
Hormone Imbalance
Apple’s shares rose 4.2 percent on Jan. 5 after Jobs said he had been diagnosed with a hormone imbalance that caused him to lose weight throughout 2008 and “that has been robbing me of the proteins my body needs to be healthy.” It was the first public disclosure of Jobs’s health since August 2004, when he revealed he had undergone successful surgery to remove a neuroendocrine islet cell tumor, a rare, slow-growing type of cancer that affects as many as 3,000 people in the U.S. annually.
Corporate governance experts say shareholder interest in Jobs is unusually high because he is considered synonymous with Apple. He returned as CEO in 1997, turning the once-unprofitable maker of Macintosh computers into a successful consumer- electronics company with the iPod media player and iPhone. Jobs established himself as the face of Apple, serving as the main pitchman at every major product announcement over the past decade while yielding little time to other top executives.
Jobs’s Brand
“Steve Jobs himself thinks the Steve Jobs mystique is of value – otherwise, why not have other people introduce those products over the past 10 years?” said Jeffrey Sonnenfeld, associate dean of the Yale University School of Management. “Steve Jobs, Martha Stewart and Donald Trump have all made the boss the brand. The boss is the brand at Apple.”
The company’s directors, who include Google Inc. CEO Eric Schmidt, former U.S. Vice President Al Gore and Genentech Inc. CEO Arthur Levinson, have declined to comment or haven’t responded to requests for comment.
Apple’s board may have met its obligations to shareholders by notifying investors that Jobs will be on leave, said Edward Smith, a corporate governance expert at Chadbourne & Parke in New York. Chief Operating Officer Timothy Cook, who filled in for Jobs during his monthlong leave in 2004, has taken over day-to- day operations. Jobs said Jan. 14 he plans to remain involved in major strategic decisions. “Our board of directors fully supports this plan,” he said.
No Obligation?
The board isn’t obligated to provide specific details about the nature of Jobs’s illness, Smith said.
“It’s really an issue of the ability of the CEO during the period of his ill health to continue to advise and consult and manage the affairs of the company,” he said. “Someone might be able to do that from a hospital bed for several weeks just as well as they may do it from the office.”
While the SEC doesn’t require a company to disclose health information about its executives, Apple directors may want to be more forthcoming with investors, Dienhart said.
“The reason we’re talking about this is we’re not sure they’re being really honest with us,” he said. “What’s amping up our skepticism is all those other business failures in the general market.”
In the past year, the SEC has been criticized by lawmakers, investors and its own inspector general as lacking aggressiveness and being deferential to companies, including Wall Street banks. Last month, the agency admitted it failed to detect Madoff’s alleged fraud, even though it had received “credible and specific” complaints about the 70-year-old New York money manager for at least a decade.
To contact the reporters on this story: David Scheer in New York at dscheer@bloomberg.net; Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net
Last Updated: January 21, 2009 14:28 EST