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Lawyer in Charge of Apple’s Insider-Trading Policy Accused of Insider Trading (bloomberg.com)
122 points by pseudolus 34 days ago | hide | past | web | favorite | 52 comments



Greed is a wild thing!

Reading through the SEC complaint while he was a very senior executive, he was a very amateur trader.

The risk-analysis in hindsight aka - why risk jail / fines / everything to avoid a $350k loss on $10m+ of shares - is stupid.

But I'd say he clearly overestimated the risk / reward in a very amateur / fear based way.

For instance in one session, he bought ~$1.1m of stock expecting a large pop, and then sold a few days later for a net profit of only $4,500!

That should cover about an hour of his current legal bills.

Lots more detail in the actual complaint:

https://www.sec.gov/litigation/complaints/2019/comp-pr2019-1...

Eg:

- Oversaw their entire corporate law division of 30 - 50 - "Levoff was responsible for Apple’s compliance with securities laws, including providing legal advice in connection with Apple’s SEC filings and financial reporting . . . "

- Apple had a long standing "blackout" policy where insiders were cautioned NOT to trade at all that he clearly ignored / broke multiple times. Including after he sent the blackout notice updated with "the first sentence of Levoff’s February 24, 2011 email stated: “REMEMBER, TRADING IS NOT PERMITTED, WHETHER OR NOT IN AN OPEN TRADING WINDOW, IF YOU POSSESS OR HAVE ACCESS TO MATERIAL INFORMATION THAT HAS NOT BEEN DISCLOSED PUBLICLY.”


It's not always greed, sometimes it's desperation and I don't say that with any sympathy. When you're surrounded by wealthy people with wealthy spending habits you, sometimes, tend to mirror their spending habits to your own detriment. Unfortunately, "keeping up with the Joneses" is a real thing.


Call it any thing you want it's greed. I can understand a developer with $100k worth of stocks trading in desperation because they want to pay off their student loan or buy a house. But this guy had around $10 million. What desperation?


Someone who's not a developer with student loan debt might call that greed as well. We are all very sympathetic to ourselves.


And yet there's been countless studies about the point at which money stops being about comfort and it's ~$140k/year. At about $200k a year in most of the country and I'll go so far as to say $500k/year in the valley, if you are struggling with money you are being extremely stupid with it. At $10 million you could instantly retire and lead an upper middle class lifestyle off the interest alone in 90% of the country.


Very true. :-) It's all greed.


Those yachts don't buy themselves you know!


"Don't spend money you don't have to impress people you don't like."


Keeping up with the Jones's was one thing in the 1950's when the smug guy across the street had 5 years more seniority then you and was making a full dollar an hour more.

It's another when the next guy up on the corporate ladder got a $5m bonus to your $500k one.


Ya but in the 50s that extra dollar every hour would probably cover your mortgage payments on your 2000$ beach house. Today the beach house is worth 25m and the extra dollar doesnt cover lunch.


That is still greed. Money, Power, Influence, Status


weird that he could trade at all in the blackout window. my brokerage won't let me execute any trades (for relevant asset) during our window


Etrade through where I worked wouldn’t do it. This seems like something that should be tool protected tbh.


This stood out to me as well. Most major brokerage firms will not only blackout employee trading of public stock as you've mentioned but will also report transactions to the company's compliance department so the data can be reviewed for potential insider trading activity.


Do you mean the firm that manages the retirement plan or incentive comp? Or brokerage firms in general? I don't think my personal brokerage firms knows who I work for.


All the accounts I’ve opened have asked me for employer’s name and asked me to certify if I was in position to know confidential financials.


Maybe he used a brokerage account that he opened prior to working for Apple?


Interesting! I've never seen that, but maybe it's more recent? I haven't opened an account in over a decade.


Most brokerage firms will ask if you work for a public company or a FINRA-registered firm at account opening. If you didn't directly tell them you're employed by one it's still safe to assume they've gathered the information from your direct deposit information or from source-of-funds information sharing with your other financial institutions.

If you work for a FINRA-registered firm they'll send a letter to your employer asking if they'd like your transaction information to be added to the data feed. I'm guessing they can facilitate the same for publicly traded companies and their employees but I've only ever worked on the financial firm side of things so I don't know for sure.

Scary huh?


Thanks for sharing! I had no idea that information sharing happened.

I have seen the FINRA question when opening accounts now that you mention it.


Maybe he used a personal brokerage account not tied to the Apple shares he recv'd from being an employee.

That brokage being TD Ameritrade.

Anyone here work at Apple? What brokerage does the company use to deposit your RSUs?


Not TD Ameritrade, which is likely why that's where the trades weren't blocked.


> That month, he sold about $10 million of Apple stock -- virtually all of his holdings -- to avoid losing about $345,000, the SEC said.

Saving over $300k is sizable, but selling $10M in stock seems pretty risky. Wouldn't this be a huge red flag, especially for someone who works at the company? Seems to be lots of risk and not that much (comparatively) saved.

Or perhaps this was his strategy in flying under the radar, since it didn't net him that much on a percentage basis?

But most importantly, if you have ten million dollars in AAPL (and a job that pays you more besides) why on earth are you taking risks like this?


> Saving over $300k is sizable, but selling $10M in stock seems pretty risky. Wouldn't this be a huge red flag, especially for someone who works at the company? Seems to be lots of risk and not that much (comparatively) saved.

He couldn't have known the size of the loss in advance. He probably expected the loss to be larger.


Cops can get tunnel vision. If there's anyone capable of walking right up to but not crossing the "insider trading line" it's going to be a lawyer that specializes in insider trading. If there's anyone that's going to be arrested as a false positive for insider trading it's going to be someone walking right up to but not crossing the line.

I dunno if his lawyer is just very optimistic but “We look forward to defending him with respect to these allegations,” is lawyer speak for "I have a mountain of evidence that is going to make these people look like fools."

IMO whether he's insider trading or just barely not it's a stupid risk to take either way.

Obviously this (and every other comment around here) are just speculation at this point since we have no good details.


> “We look forward to defending him with respect to these allegations,” is lawyer speak for "I have a mountain of evidence that is going to make these people look like fools."

To me (a former lawyer), that vague statement is definitely not an indication that he has a strong case. He may have one, but that statement comes across as weak to me. It's what you say when you can't offer any specifics about why the allegations are untrue. (As the old lawyer saying goes: "When the facts are on your side, pound the facts. When the law is on your side, pound the law. And when neither is on your side, pound the table.")


Right, not even “My client has been a strong advocate for insider trading compliance at Apple for x years. These allegations will be proven unfounded.” Just “I look forward to doing the job I am being paid to do.”


I guess you could read it that way. Most of the time if you're the least bit guilty then "no comment" is the lawyer's comment. Obviously this comment is nothing of substance but it's certainly more upbeat than "no comment"


I disagree, it’s extremely common for lawyers to make strong denials to the press. Even if there’s nothing to back it up, it looks better from a PR standpoint than a “no comment” which puts the lawyer in a slightly better position when negotiating a settlement.


On the other hand, if anyone's going to confidently think they can successfully go a bit over the line, it's gonna be a lawyer specializing in insider trading too.


As per Matt Levine's 10 laws of insider trading, it's better than an "short-dated out of the money call option".[1]

[1]https://www.bloomberg.com/opinion/articles/2018-08-12/the-10...


Yes it seems very risky.

I have no insight into how the SEC catches these offenders, but I would assume they just: (1) collect all trades in a company X weeks before major announcement, (2) filter for outsized trades or specific derivatives, (3) take narrowed down list and see if any of those people have a relationship with the company.

Selling $10M of company stock immediately prior to an earnings announcement must certainly get flagged by the SEC for another look.


To play devil’s advocate, maybe he desperately needed the money. It’s unlikely, but that’s probably what his lawyers will argue. If that was the case, a guy in his position you’d think would be smart enough to take out a loan with his stock as collateral and not do anything fishy that could resemble insider trading like selling $10m worth of stock before earnings....


Lol remember in the mid-1990’s how self regulation of industry by industry was going to change everything? Industry was going to regulate extremely effectively because it understood all the “nuances” and save the government the expense of having to do it. I guess it sort of did change things but for the worse clearly.


Why would Apple allow senior executives to do any AAPL stock sales outside of a 10b5-1 plan? Why would a senior executive ever sell company stock outside a 10b5-1 plan? That just seems like asking for trouble. The safe thing to do once you reach a certain level is to do all stock sales of company stock through 10b5-1. Anything else is just stupidly opening yourself up to charges of insider trading.


I wonder if it's born of habit. People a lot lower down the corporate ladder very often have access to insider information. Either directly or indirectly. When those people trade on insider info it's hard to prove/not worth going after.


This isn’t an Apple “senior executive” exactly. Probably not one of the top 100 guys.


Why is this only a civil SEC investigation? This should also have an FBI / criminal component. Perhaps it is coming later like it did with Theranos and Experian.


> Why is this only a civil SEC investigation?

The civil SEC case normally comes first because the SEC investigation can have two outcomes, that often come together: civil charges by the SEC and a criminal referral to the Justice Department which then triggers a criminal investigation. But the referral itself is not generally public, and Justice doesn't usually talk a lot about investigations until/unless they file charges.


The WSJ article says there's a criminal complaint too, in New Jersey. https://www.wsj.com/articles/sec-accuses-ex-apple-executive-...


I see a State level complaint. I'd like to see a Federal investigation also.


They are federal charges: "... according to the U.S. attorney’s office in Newark, New Jersey, which filed criminal charges against Levoff".


Niceeee



He would have been better off just holding.


reminds me of martha stewart


She would've been better off not lying to investigators. She went to prison for obstruction of justice, not insider trading/securities fraud.


I always got the feeling she didn't just lie, she pissed them off while doing it.

My mother had to cover insider trading when she was teaching. She said a lot of her students 'didn't get it'. My mother also worked for the IRS, tip don't piss off the enforcement people.


Senior director at apple is considered a very senior executive? Isn’t the director level the entry point for what would be considered an executive?


He was a senior director and corporate secretary. Corporate Secretary would be the "very senior executive" function... though interestingly not senior enough to be listed as an "executive officer" on Apple's proxy statements.

Since he wasn't an "executive officer" he wasn't required to file a Form 4 with the SEC.


He could have hedged with options. In such a liquid stock, probably less likely to get noticed - although - even 10mm isn't much. Does the SEC review insider trades?


Most large tech companies actually forbid hedging their stock's equity performance with corresponding options.




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