knowledge of jobs’ health may be subject of investor lawsuits

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    Posted: 16 January 2009 08:35 AM

    Complete truth: I am honestly and thoroughly ticked off that the topic “Apple lied and no one cares . . .” was closed.  At best, the closure was premature.  At worst, it should not have been closed at all because there is a very good chance that the company, its board and/or its top executives could be civilly liable for fraud and/or criminally culpable for violation of the Securities and Exchange Act.  Those subjects are neither irrelevant nor “silly,” especially to a group of people who hold Apple stock.  Certain folks here, and I include DT in this, may not like the discussion, and the question of whether SJ and associates lied may be ugly, but if this isn’t the place to discuss these issues, please, do tell me where that place is.  Hell, I don’t even OWN Apple stock and can see the problem with the way this has unfolded and why investors would be steaming angry.  Why can’t some of you who are actual stakeholders?

    So that no one will very unwisely accuse me of something I most certainly am not, I point to the following:

    —”Required Disclosures and Corporate Governance,” an article written by Merritt B. Fox for the Summer 1999 edition of the Journal of Law and Contemporary Problems published by the Duke University School of Law.

    —”Apple’s disclosures about chief executive Steve Jobs might draw lawsuits,” an Associated Press article by Jennifer Mintz that appeared yesterday night concerning the half-assed way in which Jobs and Apple have dealt with his health issues and the potential liability they’ve created for themselves by not disclosing how ill Jobs is, who knew it and when they knew it.

    —”When a CEO Coughs, Do Shareholders Catch a Cold?” from the June 12, 2008 entry in the Wired blog Epicenter discussing Jobs’ obvious illness at the last WWDC and the company’s possible disclosure requirements.

    —”The Trouble with Steve Jobs” first published March 5, 2008 on the CNNMoney.com site and referenced by a May 6, 2008 entry on Concurring Opinions, a scholarly legal blog.  The CNNMoney.com article specifically addresses the issue of Jobs’ close association with Apple to the point of being nearly synonymous and how any illness he might have could place the company at risk for a lawsuit by investors if not properly disclosed. 

    While the article offers varying opinions from different sources, the Concurring Opinions entry author, David Hoffman, a very well-respected associate professor of law at Temple University, doesn’t put much, if any, stock in the notion that personal privacy issues trump investors’ right to know information that materially affect a publicly traded company’s business.  “Had Jobs’ health gone sour [when he was diagnosed and treated for pancreatic cancer in secrecy until after the fact], could investors have successfully claimed that Apple failed to disclose material facts?” he asks rhetorically.  “I tend to think so, and don’t think much (at all) of the balancing privacy interest. It strikes me that, no less than presidential candidates, CEOs of publicly traded firms have contracted away their right to a private medical life.”  Indeed, I believe it could be argued that the health of a CEO can affect far more people than the health of the average politician, yet they routinely disclose their medical information even though not required to do so.

    I have absolutely no doubt that there are people who are wringing their hands in glee that Jobs is seriously ill and could not care less about the company, his family, shareholders or the man himself.  These are the same people who are prone to calling those of us who care about Apple and its products “fanboys/fangirls” and accuse us of being caught in Jobs’ so-called Reality Distortion Field.  I have no use for those people and encourage them to keep their PCs and pray to the god Loki that their blue screens of death grow teeth and gnaw their heads off their thick necks. There are also those people who just love gossip and spreading mayhem, often exaggerating facts to make that gossip juicier and the mayhem more destructive.  Be that as it may, it does not do anyone any good to make like monkeys and pretend that there’s nothing to see, hear or say.  There is.  Furthermore, a lot of what has been said and is left to say is precisely because Apple and Jobs have either said the wrong thing or nothing at all.  In this instance, the primary purveyors of gossip and makers of mayhem may be themselves.  How bloody well ironic!

         
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    Posted: 16 January 2009 09:10 AM #1

    What more can be said? 
    Many here hold the belief that since SJ is now sick, somebody must have lied about him being not sick before.
    This is a flawed argument and is similar to the situation of a parent dealing with child continued asking, “Are we there yet?” Eventually the question will be answered affirmatively.

    I fully agree that the Apple Board has a responsibility to disclose health issues that might affect the long term performance of its CEO. However, they don’t need to report if he has the cold or flu.  When rumors were flying regarding his “heart attack”, recurrence of cancer, death watch etc. what should Apple have done? Continually deny?  That wouldn’t have relieved the pressure and we would be l in the same situation that we are now.

    I just choose to believe that Apple honestly dealt with the conflicts between the privacy of SJ and their corporate responsibility. When the time came, they made their announcement.

    BTW, much of the hypothesizing is based on the currently unfounded assumption that the Board had the same access to SJ’s health information as SJ did. One potential argument is that SJ is culpable for not fully disclosing his health. However, that forces us to guess when SJ’ health situation became a hinderance to his job performance/longevity.

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    Posted: 16 January 2009 10:21 AM #2

    Play Ultimate - 16 January 2009 01:10 PM

    What more can be said?

    The fact that you can ask “What more can be said?” illustrates that there is more to say.  The question answers itself.  Furthermore, there is the discussion of what arguments can be made for or against a potential shareholders’ liability suit or, in fact, that such a suit is possible.  None of that was truly broached before the topic was shut down and locked because it was deemed “silly.”  I’m offended and I didn’t even start the blasted topic.

    Many here hold the belief that since SJ is now sick, somebody must have lied about him being not sick before.
    This is a flawed argument and is similar to the situation of a parent dealing with child continued asking, “Are we there yet?” Eventually the question will be answered affirmatively.

    Sorry, but I couldn’t agree less.  First, they aren’t the same types of questions.  Jobs was not necessarily going to become ill while it can be assumed that someone riding along in a vehicle will eventually reach his/her destination.  Because it was not an eventuality that Jobs would become ill, it was necessary for someone to ask.  After some time, it became abundantly clear that, yes, he was quite ill, but the public was being fed a pack of lies. 

    I fully agree that the Apple Board has a responsibility to disclose health issues that might affect the long term performance of its CEO. However, they don’t need to report if he has the cold or flu.  When rumors were flying regarding his “heart attack”, recurrence of cancer, death watch etc. what should Apple have done? Continually deny?  That wouldn’t have relieved the pressure and we would be l in the same situation that we are now.

    If you can honestly say that, based on his appearance at WWDC, Jobs looked as though he had had a cold or the flu, then you don’t have a whole lot of experience with very sick people.  He was just this side of emaciated.  That does NOT happen due to a cold or what laypeople call “flu.”  It could happen with a very serious case of some strains of influenza.  If that were the case, then that could have reasonably had a detrimental affect on his ability to do his job.  However, more recent disclosures indicate that he’d been losing weight throughout 2008.  That’s not the “flu” or influenza. 

    Every large company has a crisis plan.  Generally speaking, they pay PR firms obscene amounts of money to prepare them.  There are times when I wonder if anyone at Apple bothered to open that binder stuck on someone’s shelf labelled “Crisis Plan” given the missteps they’ve made in this mess.  It is almost always best to be honest when being dishonest will do nothing but piss people off—especially when those pissed off people include shareholders and government agencies, to name but two groups.  But the first thing that Jobs should have done was get himself checked out.  If he didn’t do it himself, then someone on the board or in his family should have forced him to do so.  If the first doctor didn’t make sense then he should have gotten a second opinion.  I know what it’s like to trust one doctor and then have to get a second opinion because the first makes no sense.  It isn’t easy.  In fact, it’s very difficult.  However, it is better to admit illness and say that there is no diagnosis at that time but that it is being addressed than it is to leave the investor community, not to mention consumers, with the feeling or outright knowledge that there is deception afoot.

    I just choose to believe that Apple honestly dealt with the conflicts between the privacy of SJ and their corporate responsibility. When the time came, they made their announcement.

    Frankly, I really don’t want to believe that he’s lied.  I want to believe that this change of tune is based on newly discovered information.  To do that, however, I also have to believe that Jobs was in near complete denial.  That, too, gives me great pause, though for different reasons.

    BTW, much of the hypothesizing is based on the currently unfounded assumption that the Board had the same access to SJ’s health information as SJ did. One potential argument is that SJ is culpable for not fully disclosing his health. However, that forces us to guess when SJ’ health situation became a hinderance to his job performance/longevity.

    It could be said that if the board didn’t know, it is because they didn’t want to know.  It is possible that they DIDN’T want to know in the event that shareholders sued when/if the misrepresentations of his health were discovered.  If this is the case,  someone could also call for a new board of directors because the current one was asleep at the switch.

    To get back to the first question you posed, “What more is there to say?” you can see that the discourse between just the two of us generated more.  Certainly, given that I am, by no means, the most prolific poster to this forum, others would have even more to add as time went on.  Somehow, I seriously doubt this is a one-day story.

    ADDED:  I just read a WaPo article by Peter Whorisky from today’s edition that says pretty much what I’ve said in my two posts in this thread.  I guess the subject isn’t quite as exhausted, irrelevant or silly as some might think.  As vindicated as I may feel on that score, the really upsetting part about any of this is that there’s a need to speak of SJ’s health at all.  Last year saw two of my very favorite relatives pass on.  The first died of cancer and old age last April and the last on Christmas Day after suffering a heart attack.  So yes, I wish Steve Jobs and family extremely well.

    [ Edited: 16 January 2009 11:27 AM by MacTad ]      
  • Posted: 16 January 2009 11:06 AM #3

    MacTad, very eloquent post. Unfortunately, despite the obvious evidence to the contrary, Apple’s lies about Steve Job’s health will be difficult to prove. Although Jobs is hardly blameless in this, the BoD are the ones who are ultimately responsible for this mess because it is THEIR duty to protect the shareholders. They obviously did not do due diligence in the handling of this situation and should be held accountable.

    I wish Jobs a LONG and HEALTHY retirement.

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    Posted: 16 January 2009 11:55 AM #4

    Play Ultimate - 16 January 2009 01:10 PM

    Many here hold the belief that since SJ is now sick, somebody must have lied about him being not sick before.

    How can you presume that? Have you considered that since the letter about a “hormonal imbalance” was published, Steve went on to develop pancreatitis and was advised to have the remains of his pancreas removed?

    Personally, what I think is far worse than the perception of mishandling of a potentially developing situation, is the continued witch-hunt regarding Steve’s health, and then media pundits jumping up and down thinking they have been misled when the situation changes (Jim Goldman, I’m referring to you).

    I, for one, feel that SJ will return to Apple after a period of convalescence. Having been forced out of Apple once already, can anyone seriously think that Steve would be happy to retire from Apple unless he was on his deathbed?

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    Posted: 16 January 2009 11:59 AM #5

    litespeed - 16 January 2009 03:06 PM

    MacTad, very eloquent post. Unfortunately, despite the obvious evidence to the contrary, Apple’s lies about Steve Job’s health will be difficult to prove. Although Jobs is hardly blameless in this, the BoD are the ones who are ultimately responsible for this mess because it is THEIR duty to protect the shareholders. They obviously did not do due diligence in the handling of this situation and should be held accountable.

    I wish Jobs a LONG and HEALTHY retirement.

    Thank you, litespeed, for the compliment AND for starting the original thread.  Now, I’m going to admit to a bit of ignorance about usual and customary practices when it comes to companies as large as Apple both in market cap and number of employees.  Is it normal to have such a small board of directors in companies of Apple’s size?  It occurs to me that with a greater number of directors, individuals might be more inclined to speak truth to power, as it were.  Of course, that also leaves the board more prone to intrigue, but that may be the price paid. 

    I recently saw a thread here that I don’t think I read completely naming either a Fidelity or Vanguard fund as Apple’s largest shareholder.  It would seem that they’d have someone representing them on the board.  If not, and they were even one quarter as dumbfounded by Steve’s medical leave as the rest of us, they’ve got to be very unhappy about the lack of disclosure be it by Jobs or the board.  Have they made any statement to date?

    Proving who knew what and when kind of comes down to how far any individual is willing to go to keep the secret.  I think it is extremely safe to assume all of the defendants will fight any and all requests for discovery documents.  They probably won’t win, but they can drag the fight out so long as to make any possible judgment against any or all of them cost ineffective.  The holy grail of discovery with regard to Steve would be his medical records.  That’s the subpoena the defendants will fight hardest to get quashed, assuming the case doesn’t get thrown out altogether in pre-trial.  If shareholders had the funds and inclination, based on the general agreement in articles that this is an unsettled area of the law (disclosure of a key employee’s health status to shareholders et al.), this case could end up at the U.S. Supreme Court.  Fascinating stuff, really.

    Anyway, thanks again.

         
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    Posted: 16 January 2009 12:56 PM #6

    Rotten Reporting

    The media’s coverage of Apple bites. Here’s why.
    Daniel Lyons
    Newsweek Web Exclusive
    Jan 16, 2009 | Updated: 11:17 a.m. ET Jan 16, 2009

    For the past six months Steve Jobs has been looking terribly ill. But only this week did Apple finally acknowledge that Jobs isn’t doing well, when the company announced that Jobs would take a leave for six months. Some suggest the company has misled investors; shareholder lawsuits seem likely. But how did the company manage to carry on this charade for so long? The sad fact is they had help from the media.

    The worst thing about the coverage of the Steve Jobs health fiasco at Apple is not only that much of the media failed to pursue the story. A lot of us feel uneasy about prying into someone’s health. We’d just rather not go there. But in this case the media went beyond just ignoring the story and actually helped Apple tamp down the story, which kept bubbling up, usually on blogs.

    On Wednesday night I went on CNBC and was obnoxious enough to point out, on the air, that CNBC itself had been put into the latter camp by a Silicon Valley bureau chief who had appointed himself the official defender of Steve Jobs and Apple. Worse yet, in December, when one blog in the Valley reported that Jobs had canceled his annual Macworld keynote because “Steve’s health is rapidly declining,” this reporter went out of his way to attack that outlet and refute its report, both on air and in print. The CNBC guy claimed he had sources deep inside Apple who were telling him that Jobs was healthy. “Apple’s Jobs is (Still) Fine,” was his headline on the CNBC Web site.

    Turns out, however, that the blog - a gadget site called Gizmodo ? was right, and the CNBC guy was wrong. When I was on air, I pointed this out, and suggested the CNBC reporter should apologize to Gizmodo, and also to his viewers for having misled them. For this I’ve now become persona non grata at CNBC. From what I was told after the show, it’s highly unlikely that I’ll ever be invited back.  (For what it’s worth, after the show I apologized to Goldman and others at CNBC for being so rude. And the next day, a CNBC spokesman said that I have not been “banned” from the network.)

    The larger takeaway is what this episode says about how the media covers Apple. It’s one thing for PR flacks to tell lies. That is, after all, what they get paid to do. But it’s another thing for the media to join in on the action.

    The fact is, in the eyes of the media, Apple is the corporate equivalent of Barack Obama - a company that can do no wrong. Even in Silicon Valley, where much of the press corps are pretty much glorified cheerleaders (think of all those slobbering cover stories about the Google guys) Apple’s kid-gloves treatment stands out. Reporters don’t just overlook Apple’s faults; they’ll actually apologize for them, or rationalize them away. Ever seen reporters clapping and cheering at a press conference? Happens all the time at Apple events.

    Jobs is famous for what Apple watchers call his “reality distortion field” - that is, his ability to convince people that the world is one way when it’s really another. The last six months have been the most outrageous example of the reality distortion field I’ve ever seen. Anyone with half a brain and pair of eyes could look at Steve Jobs last June and know that this was not a healthy 53-year-old man. Yet for months Apple fanboys and Apple’s friends in the media have bent themselves into pretzels in search of ways to argue that he’s in fine health.

    Now Apple finally has copped to the truth. Jobs is taking a leave of absence related to his health. This news came only nine days after Jobs put out a ridiculous open letter claiming he has a “hormone imbalance” that would be easily treated.


    Part II follows

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    Posted: 16 January 2009 12:57 PM #7

    Part II

    One of the CNBC talking heads asked me whether this rather abrupt about-face will hurt Apple’s credibility. I pointed out that to me and some of my peers, Apple has never had very much credibility. This is a company whose idea of “corporate communications” mostly involves picking up the phone and saying “No comment.” Or sometimes they’ll pick up the phone and just repeat the same meaningless sentence, over and over again, no matter what question you ask them. I’m not kidding. They really do that. And of course a lot of the time they just don’t return phone calls at all.

    Apple’s entire corporate culture is built on secrecy, and I mean crazy, CIA-style secrecy, where different teams of engineers who are working on the same project aren’t allowed to know what the other teams are doing. Apple is also pretty good at spreading disinformation and freezing out people they don’t like. Imagine what it might be like if the Church of Scientology went into the consumer electronics business, and you’d have a pretty good picture of how Apple operates.

    But some of my colleagues in the media have made a Faustian bargain with Apple. In exchange for super-special access to Jobs, they tacitly agree not to criticize the company or even to say things it doesn’t like. It’s one of those deals that seems great at first - “Hey, I just got an exclusive with Steve Jobs!” - but eventually it turns out to be rotten. For one thing, the access isn’t worth much, since all you get is lame, scripted, well-rehearsed comments. Essentially you get turned into an extension of Apple’s PR operation. And while it’s nice to get a peek behind the curtain, and it’s exciting to feel like you’ve been allowed into the “cool kids club,” the truth is that the cool kids who are pretending to be your friends are actually just using you to spread whatever disinformation they happen to need spread that week. You are, to them, nothing more than a useful idiot.

    And when the you-know-what hits the fan, as it eventually must - when, say, Apple finally admits the truth about Steve Jobs being sick, a truth that was obvious and evident for months - all those wonderful “sources” and PR pals just slip away into no-comment land, leaving

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    Posted: 16 January 2009 01:06 PM #8

    MacTad - 16 January 2009 12:35 PM

    Complete truth: I am honestly and thoroughly ticked off that the topic “Apple lied and no one cares . . .” was closed.

    Mods, what was the reason that thread was closed?

    If the problem was discussed out in the open it would go away but if it isn’t discussed at all then you’re making the same mistake that Apple’s BoD has made in not disclosing enough information to settle fears. Its like the BoD is keeping everything in Gore’s lockbox.

    [ Edited: 16 January 2009 01:10 PM by Eric Landstrom ]

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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

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  • Posted: 16 January 2009 01:21 PM #9

    Appleinsider forums are awaiting your rehashing of personal speculation.
    The assertion that ?Apple lied and no one cares . . .? is juvenile and preposterous.
    The issue is far more complex.
    The Board of Directors are honourable and respected.
    No laws have been broken.
    No one ever guaranteed the stock price would rise when you wanted it to.
    Making things up to discuss is dramatic but pointless.

         
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    Posted: 16 January 2009 01:32 PM #10

    daveynb - 16 January 2009 05:21 PM

    Appleinsider forums are awaiting your rehashing of personal speculation.
    The assertion that ?Apple lied and no one cares . . .? is juvenile and preposterous.
    The issue is far more complex.
    The Board of Directors are honourable and respected.
    No laws have been broken.
    No one ever guaranteed the stock price would rise when you wanted it to.
    Making things up to discuss is dramatic but pointless.

    Who cares about laws, were talking ethics. Ethics are a higher standard and whether you like it or not there is going to be a lawsuit over this if for no other reason than to file a discovery motion to get the information the street believes that Apple’s BoD has withheld which is that the BoD didn’t bother to inquire into Jobs health?meaning that Apple’s BoD failed to exercise their fiduciary duty to the shareholders.

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    For those who look, a flash allows one to see farther.

         
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    Posted: 16 January 2009 05:31 PM #11

    “Apple lied and no one cares…” is a confrontational kind of topic title.  That “Apple lied” can’t be presumed true without some kind of investigation, and to say that “no one cares” about any of this is false—many on AFB sure as heck do care about Apple’s forthcoming-ness and handling of this matter.

    On the other hand, this topic title is just fine.  Even “Did Apple lie?” (instead of “Apple lied”) might stand a chance of staying unlocked.  Discussion of Apple’s BoD’s truthfulness, info disclosure, etc. is 100% fair game.

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    Posted: 16 January 2009 06:24 PM #12

    MacTad - 16 January 2009 12:35 PM

    Hell, I don’t even OWN Apple stock and can see the problem with the way this has unfolded and why investors would be steaming angry.  Why can’t some of you who are actual stakeholders?

    I DO OWN a lot of AAPL.  My question to you is simply this: Have you shorted or plan to short AAPL?  Why else you care?

    I have a very personal opinion on all this and other stocks: If you are NOT a stock owner, and do not plan to buy the stock, I do not need to listen to your whining on it.

    I support DT one hundred percent.
    :-x

         
  • Posted: 16 January 2009 07:04 PM #13

    Eric Landstrom - 16 January 2009 05:32 PM

    Who cares about laws, were talking ethics. Ethics are a higher standard and whether you like it or not there is going to be a lawsuit over this if for no other reason than to file a discovery motion to get the information the street believes that Apple’s BoD has withheld which is that the BoD didn’t bother to inquire into Jobs health?meaning that Apple’s BoD failed to exercise their fiduciary duty to the shareholders.

    Steve Jobs and the Apple Board of Directors owe you SFA except to follow through on the promises they make for their products and to make money honestly.
    Your logic board blew up?  Sue ‘em.
    Your display is fuzzy and they wont replace it?  Sue ‘em.
    Steve Jobs is sick?
    Unless his being sick means that revenue is down then STFU.
    You want to sue because the stock price is down? Sue Cramer, or a hedge fund, or Bloomberg.
    They’re the real movers of the stock price.
    Steve just does his job the best he can and improves the bottom line every quarter.
    That is his duty to the shareholders.

         
  • Posted: 16 January 2009 10:50 PM #14

    A couple of points:

    The topic was closed at member request.

    Second, the topic title made two unsubstantiated claims:

    1. Apple lied.

    2. No one cares.

    This topic and its discussion is a much better one for earnest discussion than the topic referenced (and closed) which was positioned by its title on premises that had no underlying factual substantiation.

    Whether or not I like the discussion of SJ’s health or the possibility of management culpability concerning disclosures of his health matters is irrelevant. Let’s keep to the known issues and have at it.

    [ Edited: 16 January 2009 10:58 PM by DawnTreader ]      
  • Posted: 17 January 2009 01:21 AM #15

    Eric Landstrom - 16 January 2009 05:32 PM
    daveynb - 16 January 2009 05:21 PM

    Appleinsider forums are awaiting your rehashing of personal speculation.
    The assertion that ?Apple lied and no one cares . . .? is juvenile and preposterous.
    The issue is far more complex.
    The Board of Directors are honourable and respected.
    No laws have been broken.
    No one ever guaranteed the stock price would rise when you wanted it to.
    Making things up to discuss is dramatic but pointless.

    Who cares about laws, were talking ethics. Ethics are a higher standard and whether you like it or not there is going to be a lawsuit over this if for no other reason than to file a discovery motion to get the information the street believes that Apple’s BoD has withheld which is that the BoD didn’t bother to inquire into Jobs health?meaning that Apple’s BoD failed to exercise their fiduciary duty to the shareholders.

    It would probably be best to talk about the laws, which you are since you’re referencing a lawsuit.  Talking ethics is considerably more difficult.  I’m thinking of a line from Broadcast News…

    1/ You *totally* crossed the line with that piece…. 2/ It’s hard *not* to cross the line when they keep moving the little sucker, don’t they!?

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