Zeev...re AAPL
Insiders BEING looked At
Apple Execs' Stock Sales Studied
MAY WONG
AP Technology Writer
Fri, Jun. 28, 2002
SAN JOSE, Calif. (AP) - Twice within the last two years, Apple Computer Inc. executives sold company stock worth millions of dollars just weeks before Apple warned of disappointing financial results. Each earnings warning sent shares tumbling.
While the sales could have an innocent explanation, analysts consider them unusual because at no other point during the period did any other clusters of large sell-offs by Apple executives occur.
Big stock sales among executives are common, especially in the high-tech sector, where stock options are often a major part of compensation.
But insider-trading analysts consider the Apple executives' sales unusual because the people involved, though they were mostly exercising stock options, tend to be less active stock sellers.
"These sells seem to be well-timed," said Lon Gerber, director of insider research at Thomson Financial, coming as they did on the eve of two of three Apple earnings warnings over a period that began in August 2000.
"It's always a bit suspicious" when executives sell before a warning, said Martin Friedman, director of research at Friedman, Billings, Ramsey & Co. Inc.
The Cupertino-based computer maker defended the sales, which were questioned in a column last week on a Web site for Mac enthusiasts called Resexcellence.com.
Apple denied any notion of impropriety.
"I can assure you that no executive would have exercised options had they believed we would not meet our original guidance for the quarter," Fred Anderson, Apple's chief financial officer, said in a written statement.
Anderson, one of the executives who sold stock prior to the warnings, refused further comment. So did all the others after attempts by The Associated Press to reach each individually.
The biggest flurry of sales - 1.9 million shares worth more than $49 million - occurred between April 22 and May 31, according to Securities and Exchange Commission filings, and were executed by Anderson and five other executives: senior vice president of applications Sina Tamaddon; senior vice president and general counsel Nancy Heinen; senior vice president of software engineering Avie Tevanian; senior vice president of finance Peter Oppenheimer; and executive vice president Timothy Cook.
During that period, Apple's stock was hovering around $24 on the Nasdaq Stock Market. On June 18, Apple warned that revenues for the quarter that began April 1 would be lower than expected. Shares are now trading around $17.
Back in August 2000, three of the same executives - Tamaddon, Heinen and Tevanian - and a fourth, senior vice president of hardware engineering Jon Rubinstein, sold more than 370,000 shares worth more than $21 million.
One month later, on Sept. 28, 2000, Apple issued an earnings warning for the quarter that was to end in two days, saying the company would fall 10 percent short of expectations because of a slowdown in PC sales.
Stunned investors lopped the value of the company's shares in half; and the stock price plummeted from $53.50 to $25.75 the next day. Shareholders who accused Apple and its executives of misleading the public about the company's financial prospects during a July 2000 presentation filed a still-pending class action lawsuit in September 2001 that mentions the pre-stock plunge sales by the four executives.
No such clusters of sales occurred near a Dec. 5, 2000 earnings warning, and during 2001 there was little trading activity among Apple executives or directors. Four of them, including Cook and Tamaddon, sold stocks months apart worth about $12.5 million last year.
To guard against insider trading, companies often restrict officers from buying or selling their stock within certain time periods, and some executives exercise their options on regular schedules to avoid any appearance of insider trading.
Many companies ban trading 30 days before an earnings announcement, though policies on trading windows vary from company to company and are not regulated.
Apple refused to detail its policy and is not required by law to disclose it.
The law is clear, however, in prohibiting the trading of stocks on inside information.
Earlier this month, former ImClone Systems Inc. chief executive Samuel Waksal was arrested on charges of insider trading for allegedly tipping off family members to sell stock before the Food and Drug Administration rejection of his company's application for its cancer drug, Erbitux, became public. The scandal has embroiled home-design maven Martha Stewart.
The SEC would not comment on the Apple stock activity or whether the agency has received a complaint on the matter.
Nonetheless, insider trading cases are never cut-and-dried.
"It's very difficult to prove those cases because you can always say other reasons why you needed the cash," said Nell Minow, co-founder of The Corporate Library, a corporate governance research organization.
Insider trading cases accounted for 12 percent of the 485 cases the SEC brought before a court or administrative proceeding in 2001.
Many more cases are investigated but do not result in action. Specific figures for insider trading inquiries were not available, but the SEC reported a total of 2,810 pending investigations in 2001.
The SEC has been overwhelmed by an increasing workload in recent years, especially with the Enron scandal and other corporate disclosures, most recently that of WorldCom.
Understaffing, due in part to high staff turnover and a limited budget, has hampered the agency's ability to enforce securities laws and generated a growing backlog of smaller cases. |
