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Similar question, but should BW turn out to be correct and Apple was for lack of a better word, lying, aren't they on the hook as a public company?

Tomte 8y ago
Matt Levine likes to say that "everything is securities fraud".
- hyperrail 8y ago
  Funnily enough, he actually covered this angle yesterday! Regular readers know that a major theme of this newsletter is Everything Is Securities Fraud, so in that vein, let us consider a hypothetical. What if: 1. Everything in the Businessweek story is true, Chinese spies planted hardware backdoors in computers built and used by major American companies, and the FBI investigated along with those companies and discovered the backdoors. 2. It is a national-security secret and the companies were instructed by the FBI never to acknowledge it. 3. The companies are patriotically but falsely denying the hack. If that is true—and I have no particular reason to think it is, it’s just the sort of hypothetical we like around here—then, obvious question: Is it securities fraud? (Assuming that the hack is potentially material to the companies’ business?) I do not think that the securities laws explicitly allow companies to make false statements of material fact if required for national security, but you could see giving them a pass here. https://www.bloomberg.com/view/articles/2018-10-04/computer-spies-hacked-reality https://www.bloomberg.com/view/articles/2018-10-04/computer-...
  - hef19898 8y ago
    It will definetly be bad for the business of these companies, especially for Amazon, as it undermines customer trust. In the case of Amazon also the most profitable division, AWS, which provided the majority of profits in 2017.
  - cm2187 8y ago
    Pushing the conspiracy theory just for the sake of argument. You could imagine that some employees have been in contact with the NSA about these chips and been told that they cannot disclose anything to their employers. The management of Apple would deny the claim in good faith. It would be hard to make a claim that Apple meant to mislead investors.
PhilWright 8y ago
Apple would need to show that they had lost business as a result of the false story and hence claim damages. Businessweek would defend themselves based on it being in the public interest and they cannot reveal their confidential sources. Probably hard for Apple to prove they have lost money because of the story and it would need to be enough to warrant the time and hassle of a court case. Not to mention they would probably rather avoid having the issue mentioned even more often by dragging it through court for a year or two.
- hyperrail 8y ago
  Think you meant to reply to jdorfman (parent poster to the post you actually replied to).
kps 8y ago
Not if the US government has instructed or allowed Apple/Amazon/etc to do so on national security grounds.

Tomte 8y ago

Matt Levine likes to say that "everything is securities fraud".

hyperrail 8y ago
Funnily enough, he actually covered this angle yesterday! Regular readers know that a major theme of this newsletter is Everything Is Securities Fraud, so in that vein, let us consider a hypothetical. What if: 1. Everything in the Businessweek story is true, Chinese spies planted hardware backdoors in computers built and used by major American companies, and the FBI investigated along with those companies and discovered the backdoors. 2. It is a national-security secret and the companies were instructed by the FBI never to acknowledge it. 3. The companies are patriotically but falsely denying the hack. If that is true—and I have no particular reason to think it is, it’s just the sort of hypothetical we like around here—then, obvious question: Is it securities fraud? (Assuming that the hack is potentially material to the companies’ business?) I do not think that the securities laws explicitly allow companies to make false statements of material fact if required for national security, but you could see giving them a pass here. https://www.bloomberg.com/view/articles/2018-10-04/computer-spies-hacked-reality https://www.bloomberg.com/view/articles/2018-10-04/computer-...
- hef19898 8y ago
  It will definetly be bad for the business of these companies, especially for Amazon, as it undermines customer trust. In the case of Amazon also the most profitable division, AWS, which provided the majority of profits in 2017.
- cm2187 8y ago
  Pushing the conspiracy theory just for the sake of argument. You could imagine that some employees have been in contact with the NSA about these chips and been told that they cannot disclose anything to their employers. The management of Apple would deny the claim in good faith. It would be hard to make a claim that Apple meant to mislead investors.

PhilWright 8y ago

Apple would need to show that they had lost business as a result of the false story and hence claim damages. Businessweek would defend themselves based on it being in the public interest and they cannot reveal their confidential sources. Probably hard for Apple to prove they have lost money because of the story and it would need to be enough to warrant the time and hassle of a court case. Not to mention they would probably rather avoid having the issue mentioned even more often by dragging it through court for a year or two.

hyperrail 8y ago
Think you meant to reply to jdorfman (parent poster to the post you actually replied to).

kps 8y ago

Not if the US government has instructed or allowed Apple/Amazon/etc to do so on national security grounds.