Tuesday, July 05, 2022

Apple’s former corporate secretary admits to insider trading

By John Filar Atwood

A three-year effort to bring to justice Apple’s former corporate secretary and corporate law director culminated yesterday in his pleading guilty to six counts of securities fraud. Each count carries a maximum penalty of 20 years in prison and a $5 million fine. Sentencing is scheduled for early November (U.S. v. Levoff, February 13, 2019, Martini, W.).

According to the Department of Justice, Gene Levoff had used his position at Apple, which included serving as co-chair of the tech giant’s disclosure committee, to trade Apple shares for his own benefit based on knowledge he received by virtue of his insider role at Apple. The DOJ noted that Levoff was in charge of enforcing Apple’s own ban on insider trading at the time he was engaging in insider trading for his personal financial gain.

The DOJ found that from February 2011 to April 2016, Levoff misappropriated material, nonpublic information about Apple’s financial results and then executed trades of the company’s shares. The illegal trading resulted in profits of $227,000 on certain trades and the avoidance of $377,000 in losses on others.

As co-chair of the disclosure committee, Levoff was able to review the company’s filings before they were sent to the SEC for inside information that he used to guide his trading of Apple shares, according to the DOJ. This included both profiting on good news and avoiding losses when the company reported bad news, the DOJ said.

Levoff was subject to Apple’s regular quarterly blackout periods, which prohibited individuals who had access to material nonpublic information from engaging in trades until a certain period after the company disclosed its financial results to the public. The DOJ determined that Levoff ignored the restrictions and the company’s insider trading policy and traded anyway.

The DOJ found that on several occasions, Levoff executed trades within a blackout period after notifying other individuals subject to the restriction that they were prohibited from buying or selling Apple stock until the blackout period terminated.

Levoff was initially charged in February 2019. He filed a motion to dismiss based on the argument that no statute explicitly criminalized insider trading, but that motion was denied in February 2020.