As a trillion-dollar company, it’s no surprise that Apple has a battalion of lawyers who are responsible for looking after everything from intellectual property and trade secrets to licensing and content deals. In fact, the company even has a senior counsel who looks after setting and monitoring the company’s policies on insider trading, but now it seems that he hasn’t exactly been practicing what he’s been preaching.
For those unfamiliar with the term, “insider trading” is when investors in a publicly traded company are able to benefit from information that’s not otherwise publicly available. Naturally, this gives them an advantage over other investors in knowing when to buy or sell stock, and is illegal for obvious reasons.
Although officers, directors, and employees of a company are permitted to buy or sell the company’s stock despite the fact that they may have special knowledge, there are numerous restrictions on these transactions. Employees are usually restricted from selling shares during key times such as before an earnings announcement, and any trades they do make must be disclosed to the Securities and Exchange Commission (SEC) to be publicly released for all other investors to see.
Unfortunately, it seems that one such senior Apple director didn’t quite “get the memo” on how this works, and it’s a rather ironic twist, as it turns out he’s the very same one who effectively wrote the memo.
According to CNBC, Gene Levoff, Apple’s senior director of corporate law, and the lawyer in charge of enforcing Apple’s Insider Trading Policy, has just been indicted for insider trading.
The U.S. Attorney in New Jersey shared the indictment in a press release this week, alleging that Levoff used inside information from within Apple, including unpublished financial results as a basis for his decisions to trade Apple stock. He’s specifically facing six counts of securities fraud and six counts of wire fraud.
This scheme to defraud [Apple] and its shareholders allowed Levoff to realize profits of approximately $227,000 on certain trades and to avoid losses of approximately $377,000 on others.U.S. Attorney Press Release
In short, it seems that as soon as Levoff became aware that Apple was about to publish strong financial results for a specific quarter, he immediately purchased a large quantity of stock before the news was actually made public. This allowed him to purchase shares at a much lower price with the knowledge their value would increase after the earnings were publicly announced, and Levoff later did exactly that, selling those same shares for a profit.
Further, Levoff allegedly traded his stock during a blackout period when all Apple employees were prohibited from buying or selling stock, and not only should he have been well aware of this as the watchdog for Apple’s Insider Trading Policy, but he in fact explicitly informed Apple employees about the blackout period at the same time as he was trading Apple stock himself.
Levoff joined Apple in 2008 and became a senior director of corporate law in 2013. He was fired from Apple last year following a quieter investigation by Apple and the SEC, and was charged by the SEC with civil penalties in February. However, a civil suit would have simply required Levoff to make some kind of financial compensation. This new indictment involves criminal charges, for which he could face a maximum penalty of 20 years in prison for each count, in addition to fines.