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Former Apple exec who enforced insider trading rules admits to insider trading

202 points by danso 4y ago

erehweb 4y ago
$600k over 5 years is a big amount of money, but probably fairly small compared to his TC as a senior director. Not a great risk/reward tradeoff
- rot13xor 4y ago
  He probably didn't think he'd get caught or ego.
- walrus01 4y ago
  anyone want to make a guess at what this guy's gross W2 salary was?
  - phphphphp 4y ago
    Considering he started there in 2008 when the market cap of apple was <$100bn I’m going to guess it was low 6 figures and that the insider trading represented a meaningful amount of money to him.
    - refulgentis 4y ago
      Cosign, usually wouldn't write a content-free post but this is downvoted yet aligns with my semi-informed understanding
- scrose 4y ago
  It’s worth considering that this is likely not the whole story. If he was corrupt enough to do this himself, there’s a non-negligible chance he had plenty of other family and/or friends who were also likely trading on privileged information and which he may have had some other beneficial deals with that haven’t been found out
  - SrslyJosh 4y ago
    Unless he's incredibly dense, I imagine that all of the trades were actually made by friends, family, or outside accomplices.
- gowld 4y ago
  It was too easy. Imagine if every day you walked past a newsstand, and for some reason there is an envelope with $100K in cash there, every day, all the time. It's totally illegal to take it, but it's right there in front of you, and so easy to grab, and no one's going to notice...probably.
  - cpncrunch 4y ago
    >and no one's going to notice...probably. Except someone usually does eventually notice, and most people are smart enough to realise this.
- cptaj 4y ago
  Thats what they pinned him for.
- paulpauper 4y ago
  apple is famous for not paying that well. this is not google.
  - metadat 4y ago
    Uhm, no? This is false. Apple is literally swimming in money; my friends who work there are compensated well enough to buy one or more houses in the Bay Area. That's no small feat.
    - namecheapTA 4y ago
      My father works construction and owns two houses in California, both paid off even. Although in the central valley. If an apple engineer can't buy a house or two in the bay area, who can?
  - wly_cdgr 4y ago
    ??? According to Levels, ICT5 at Apple is ~$440k TC averaged over more than 150 datapoints. That's not even management... I think it's safe to say that $600k couldn't have been more than 20-25% of his TC over 5 years, IF that. Absolutely braindead to take that huge a risk for that little reward (not to mention a deeply shitty thing to do given his position, obv). That's not even close to 1x, never mind an order of magnitude!
    - daniel-cussen 4y ago
      There's companies handling publicly available salary information for them, better than Levels can fight back against them. Same with Glassdoor. Coopting both. And the data isn't objective, they show different averages to different people. Same firms handle both, they're on the same lists, part of PR budget. But it does give a vague idea. Better than that get a better picture from the Bureau of Labor Statistics that does in fact compile that information for each job and is much harder to fuck with, it's illegal in fact. Salary data on this forum seem pretty inflated, well it's very warped. It's all to make it seem there's a giant pot of gold at the end of the rainbow if your program compiles and you "get hired."
radicaldreamer 4y ago
How did he think he was going to get away with it?
- bobthechef 4y ago
  Indeed. But I also wonder how common this is. Imagine you have a deal with a friend who is a stock broker. You supply him with insider information to make trades. You give him your money and he makes trades on your behalf, and to conceal the deal, he trades Apple stock uniformly across all clients. He doesn't do anything that would make you stand out. Or let's say his greed doesn't get the best of him and he doesn't invest anything but conservative sums of his own money in Apple stock using this information, and then, to launder kickbacks, you start a small company unrelated to investing that he pays for something intangible (like a "membership" or "retainer"), or he pays you cash. I would find it difficult to believe that this sort of stuff isn't happening all over the place.
- mistrial9 4y ago
  .. because his secrecy, his self-control and his control of others in the room was "perfect" .. This obvious hypocritical ego bully jerk BS that can be seen from a mile away and the other finance people WANT IT. just my guess
- applemp499 4y ago
tpmx 4y ago
This ($600k) is peanuts. 2008: How Jobs dodged the stock option backdating bullet https://www.cnet.com/culture/how-jobs-dodged-the-stock-option-backdating-bullet/ https://www.cnet.com/culture/how-jobs-dodged-the-stock-optio... tl;dr: > In the case of Apple, not only did the board send two sacrificial lambs to slaughter, but the feds hung some pretty hefty charges on their necks to boot. The lambs in question are former Sr. VP, General Counsel, and Secretary Nancy Heinen [settled with the SEC for $2.2 million], and former CFO and director Fred D. Anderson [settled with the SEC for $3.5 million]. > The SEC's complaint focuses on the backdating of two large option grants, one of 4.8 million shares for Apple's executive team and the other of 7.5 million shares for Steve Jobs. ... > At the end of the day, Jobs dodged a bullet because of 1) his value to Apple's shareholders, 2) his value to the U.S. economy, and 3) just plain luck that neither Apple's board nor the SEC found a smoking gun to force them to do something they didn't want to do.
- herodotus 4y ago
  I will not claim to know the details of this particular story. But I do want to point out that, when I joined Apple, stock options were part of their bonuses. We were told whether or not we would get stock options, and when, during our annual one-one meetings with our managers. These meetings were held across the company over a period of a few weeks. We were told that the price of the option would be the minimum price over some period of days up to the time the board approved the employee options for everyone who was given them. So if employee a was told their award at the beginning of the month, and employee b told three weeks later, they would be given the option at the same price. This applied in my case, and seemed completely fair to me. I was a lowly engineer with no special value to the US economy, the shareholders etc. It was a sensible and rational way to award stock options. Apple switched to a new scheme, probably to avoid the appearance of something untoward, namely RSU: actual stock awards rather than options, but with restrictions on when we got them. Backdated stock options is just not comparable to insider trading.
  - tpmx 4y ago
    In the above case of stock option backdating: https://www.cultofmac.com/443542/steve-jobs-apple-stock-backdating-scandal/ https://www.cultofmac.com/443542/steve-jobs-apple-stock-back... > According to Forbes, which broke the Apple stock-backdating story, Jobs’ award of 7.5 million shares got approved at a board meeting on August 29, 2001. At that point, Apple’s share price was $17.83. However, Jobs continued to argue over the point at which the options would vest. That resulted in Apple missing the deadlines for filing the proper information with the Securities and Exchange Commission and its auditors. > It took until December for the parties to agree upon terms. At that point, Apple’s stock price stood at $21.01. Backdating gave Jobs a lower share price that, on paper, made him $20 million richer. Morally speaking I find this comparable to insider trading. At the time Apple was worth approximately 300x less than it is now, so the $20 million damage to the shareholders back then would correspond to about $6 billion today.
throwaway5959 4y ago
Doctors smoke cigarettes. News at 11.
- challenger-derp 4y ago
  Unlike trading on insider information, smoking is legal. One could advice against smoking and continue smoking himself without legal repercussion.
baby 4y ago
They all do insider trading at small scales, that's for sure.
anewpersonality 4y ago
Folks at public companies are getting away with far worse.
- jjtheblunt 4y ago
  like what?
  - hackernewds 4y ago
    unfounded grand claims
wly_cdgr 4y ago
How did this dingus think he was not gonna get caught? Also this was surely peanuts compared to his TC? Incredibly stupid behavior
- hn_throwaway_99 4y ago
  This is exactly what I don't understand. From this line: > In fact, he even informed Apple employees about a trading blackout period for AAPL stock, while also buying and selling the stock himself. I mean, that's super black and white and super hard to hide. I just read the article, not any of the linked source materials, so I'm curious as to how he tried to hide these trades (I'm assuming he did).
AlbertCory 4y ago
You'd have to not be paying attention over the years not to realize the SEC monitors big changes in stock prices and who benefits from them. Even if you tell your neighbor or brother-in-law and they benefit, you're not in the clear. The funny thing for me is: this guy had to know that. I don't know how Apple does this, but at Google I chatted (not really an "interview" yet) with a guy who interrogates and catches people like this. Interrogating someone who's probably lying is a skill that law enforcement people have, and most of us don't. He had a background with the FBI, and I had no particular skills he wanted. But catching people exactly like this was part of his job. I don't know about this guy. He doesn't seem to have a LinkedIn profile.
- jacquesm 4y ago
  > Interrogating someone who's probably lying is a skill that law enforcement people have, and most of us don't. Interrogating is one thing, spotting the lie (or the inconsistency that leads to spotting the lie) is another skill entirely. I have a colleague that is scarily good at this.
  - AlbertCory 4y ago
    Yeah, it would be a fun course to take, for sure (it's offered, I found out).
    - CSMastermind 4y ago
      I'd be skeptical of courses like that. Science has repeatedly found no evidence of this being an ability that you can learn. There's an entire industry peddling pseudoscience around it but there's basically no evidence that it works. See this recent Skeptoid for a good summary: https://skeptoid.com/episodes/4836 https://skeptoid.com/episodes/4836 That episode quotes an opinion paper in Frontiers in Psychology, which I'll also do here: > Is the rational course simply to drop this line of research? ...We have now sufficient evidence that there are no specific non-verbal behavioral signals that accompany lying or deceitful behavior. We can safely recommend that courts disregard such behavioral signals when appraising the credibility of victims, witnesses, and suspected offenders. For psychology and law researchers it may be time to move on.
whywhywhywhy 4y ago
I’m convinced every single person who is in control of these rules does insider trading.
jeffbee 4y ago
A quarter million bucks. Peanuts. With a director's comp and Apple's performance all this guy had to do was vest and hold, sell during legit trading windows, walk off with a hundred million easily.
- jiveturkey 4y ago
  $600k. There was both profit taking ($250k) and loss avoidance ($350k). Still peanuts.
logicalmonster 4y ago
This will not be a popular opinion, but just to give my random 2 cents. I theorize that the best way to solve the fairness issue of insider trading is to make it legal, but incredibly transparent. There is no way to catch the overwhelming majority of the actual insider trading that happens short of a dystopian SEC that continuously monitors everybody's phone calls, movements, emails, and all of their finances or just banning employees of publicly traded corporations from investing in their hard work, which also seems unfair. The best way to benefit the public is for price speculation by insiders to be telegraphed either in real-time, or preferably with advance notice, to any member of the public. If Joe Sixpack working at Apple wants to buy or sell stock or options the day before earnings (or any other day) based on some knowledge he has, I'd say it should be legal. He should just have to report that intent to some SEC website. Any member of the public should be able to go to some well-designed SEC website the day before and see that Joe along with 465 other employees plan to buy XXXX calls. If insiders want to trade in publicly traded companies, people should be able to have data on that to notice patterns and benefit from this information. If they decide they want to sell some stock, that should be reported at least in real time, or preferably with at least 1 day notice. If the goal is to benefit the greater public, the information should be designed to flow to the public. This pre-knowledge of their trades is the rule I especially want to impose on the corrupt legislators, some of whom are known as suspiciously good traders for senile old people. The rules that they can wait 30 days before disclosing their deals are BS. They should be reported at least in real-time, or preferably at least a day before. This seems like a small price to pay for making the rules that pick the winners and losers in the marketplace, as well as the overall direction of the economy.
- thrwyoilarticle 4y ago
  I'm surprised it's not a popular opinion. It seems to fit well with libertarian/laissez-faire ideology. If it was legal, retail might better understand that they're less knowledgable about a stock than the insiders. Instead we have the compromise where retail believes insider trading doesn't happen but it's actually rampant and retail are the least likely to benefit from it.
  - 4y ago
mzs 4y ago
indictment of Gene Levoff linked at the bottom: https://www.justice.gov/usao-nj/pr/apple-s-former-director-corporate-law-admits-insider-trading https://www.justice.gov/usao-nj/pr/apple-s-former-director-c...
johnson98 4y ago
[dead]
acqbu 4y ago
that pretty much sumps up apple
jiveturkey 4y ago
This cannot be the whole story. This guy is a lawyer, and not just some rando junior lawyer in the company -- one who actually reviewed financials before publication. How can it possibly be the case that he wouldn't be aware that his (and his family's) trades are monitored? And for relative peanuts. Reminds me of the Netflix VP.

202 points by danso 4y ago

$600k over 5 years is a big amount of money, but probably fairly small compared to his TC as a senior director. Not a great risk/reward tradeoff

rot13xor 4y ago
He probably didn't think he'd get caught or ego.
walrus01 4y ago
anyone want to make a guess at what this guy's gross W2 salary was?
- phphphphp 4y ago
  Considering he started there in 2008 when the market cap of apple was <$100bn I’m going to guess it was low 6 figures and that the insider trading represented a meaningful amount of money to him.
  - refulgentis 4y ago
    Cosign, usually wouldn't write a content-free post but this is downvoted yet aligns with my semi-informed understanding
scrose 4y ago
It’s worth considering that this is likely not the whole story. If he was corrupt enough to do this himself, there’s a non-negligible chance he had plenty of other family and/or friends who were also likely trading on privileged information and which he may have had some other beneficial deals with that haven’t been found out
- SrslyJosh 4y ago
  Unless he's incredibly dense, I imagine that all of the trades were actually made by friends, family, or outside accomplices.
gowld 4y ago
It was too easy. Imagine if every day you walked past a newsstand, and for some reason there is an envelope with $100K in cash there, every day, all the time. It's totally illegal to take it, but it's right there in front of you, and so easy to grab, and no one's going to notice...probably.
- cpncrunch 4y ago
  >and no one's going to notice...probably. Except someone usually does eventually notice, and most people are smart enough to realise this.
cptaj 4y ago
Thats what they pinned him for.
paulpauper 4y ago
apple is famous for not paying that well. this is not google.
- metadat 4y ago
  Uhm, no? This is false. Apple is literally swimming in money; my friends who work there are compensated well enough to buy one or more houses in the Bay Area. That's no small feat.
  - namecheapTA 4y ago
    My father works construction and owns two houses in California, both paid off even. Although in the central valley. If an apple engineer can't buy a house or two in the bay area, who can?
- wly_cdgr 4y ago
  ??? According to Levels, ICT5 at Apple is ~$440k TC averaged over more than 150 datapoints. That's not even management... I think it's safe to say that $600k couldn't have been more than 20-25% of his TC over 5 years, IF that. Absolutely braindead to take that huge a risk for that little reward (not to mention a deeply shitty thing to do given his position, obv). That's not even close to 1x, never mind an order of magnitude!
  - daniel-cussen 4y ago
    There's companies handling publicly available salary information for them, better than Levels can fight back against them. Same with Glassdoor. Coopting both. And the data isn't objective, they show different averages to different people. Same firms handle both, they're on the same lists, part of PR budget. But it does give a vague idea. Better than that get a better picture from the Bureau of Labor Statistics that does in fact compile that information for each job and is much harder to fuck with, it's illegal in fact. Salary data on this forum seem pretty inflated, well it's very warped. It's all to make it seem there's a giant pot of gold at the end of the rainbow if your program compiles and you "get hired."

radicaldreamer 4y ago

How did he think he was going to get away with it?

bobthechef 4y ago
Indeed. But I also wonder how common this is. Imagine you have a deal with a friend who is a stock broker. You supply him with insider information to make trades. You give him your money and he makes trades on your behalf, and to conceal the deal, he trades Apple stock uniformly across all clients. He doesn't do anything that would make you stand out. Or let's say his greed doesn't get the best of him and he doesn't invest anything but conservative sums of his own money in Apple stock using this information, and then, to launder kickbacks, you start a small company unrelated to investing that he pays for something intangible (like a "membership" or "retainer"), or he pays you cash. I would find it difficult to believe that this sort of stuff isn't happening all over the place.
mistrial9 4y ago
.. because his secrecy, his self-control and his control of others in the room was "perfect" .. This obvious hypocritical ego bully jerk BS that can be seen from a mile away and the other finance people WANT IT. just my guess
applemp499 4y ago

tpmx 4y ago

This ($600k) is peanuts. 2008: How Jobs dodged the stock option backdating bullet https://www.cnet.com/culture/how-jobs-dodged-the-stock-option-backdating-bullet/ https://www.cnet.com/culture/how-jobs-dodged-the-stock-optio... tl;dr: > In the case of Apple, not only did the board send two sacrificial lambs to slaughter, but the feds hung some pretty hefty charges on their necks to boot. The lambs in question are former Sr. VP, General Counsel, and Secretary Nancy Heinen [settled with the SEC for $2.2 million], and former CFO and director Fred D. Anderson [settled with the SEC for $3.5 million]. > The SEC's complaint focuses on the backdating of two large option grants, one of 4.8 million shares for Apple's executive team and the other of 7.5 million shares for Steve Jobs. ... > At the end of the day, Jobs dodged a bullet because of 1) his value to Apple's shareholders, 2) his value to the U.S. economy, and 3) just plain luck that neither Apple's board nor the SEC found a smoking gun to force them to do something they didn't want to do.

herodotus 4y ago
I will not claim to know the details of this particular story. But I do want to point out that, when I joined Apple, stock options were part of their bonuses. We were told whether or not we would get stock options, and when, during our annual one-one meetings with our managers. These meetings were held across the company over a period of a few weeks. We were told that the price of the option would be the minimum price over some period of days up to the time the board approved the employee options for everyone who was given them. So if employee a was told their award at the beginning of the month, and employee b told three weeks later, they would be given the option at the same price. This applied in my case, and seemed completely fair to me. I was a lowly engineer with no special value to the US economy, the shareholders etc. It was a sensible and rational way to award stock options. Apple switched to a new scheme, probably to avoid the appearance of something untoward, namely RSU: actual stock awards rather than options, but with restrictions on when we got them. Backdated stock options is just not comparable to insider trading.
- tpmx 4y ago
  In the above case of stock option backdating: https://www.cultofmac.com/443542/steve-jobs-apple-stock-backdating-scandal/ https://www.cultofmac.com/443542/steve-jobs-apple-stock-back... > According to Forbes, which broke the Apple stock-backdating story, Jobs’ award of 7.5 million shares got approved at a board meeting on August 29, 2001. At that point, Apple’s share price was $17.83. However, Jobs continued to argue over the point at which the options would vest. That resulted in Apple missing the deadlines for filing the proper information with the Securities and Exchange Commission and its auditors. > It took until December for the parties to agree upon terms. At that point, Apple’s stock price stood at $21.01. Backdating gave Jobs a lower share price that, on paper, made him $20 million richer. Morally speaking I find this comparable to insider trading. At the time Apple was worth approximately 300x less than it is now, so the $20 million damage to the shareholders back then would correspond to about $6 billion today.

throwaway5959 4y ago

Doctors smoke cigarettes. News at 11.

challenger-derp 4y ago
Unlike trading on insider information, smoking is legal. One could advice against smoking and continue smoking himself without legal repercussion.

baby 4y ago

They all do insider trading at small scales, that's for sure.

anewpersonality 4y ago

Folks at public companies are getting away with far worse.

jjtheblunt 4y ago
like what?
- hackernewds 4y ago
  unfounded grand claims

wly_cdgr 4y ago

How did this dingus think he was not gonna get caught? Also this was surely peanuts compared to his TC? Incredibly stupid behavior

hn_throwaway_99 4y ago
This is exactly what I don't understand. From this line: > In fact, he even informed Apple employees about a trading blackout period for AAPL stock, while also buying and selling the stock himself. I mean, that's super black and white and super hard to hide. I just read the article, not any of the linked source materials, so I'm curious as to how he tried to hide these trades (I'm assuming he did).

AlbertCory 4y ago

You'd have to not be paying attention over the years not to realize the SEC monitors big changes in stock prices and who benefits from them. Even if you tell your neighbor or brother-in-law and they benefit, you're not in the clear. The funny thing for me is: this guy had to know that. I don't know how Apple does this, but at Google I chatted (not really an "interview" yet) with a guy who interrogates and catches people like this. Interrogating someone who's probably lying is a skill that law enforcement people have, and most of us don't. He had a background with the FBI, and I had no particular skills he wanted. But catching people exactly like this was part of his job. I don't know about this guy. He doesn't seem to have a LinkedIn profile.

jacquesm 4y ago
> Interrogating someone who's probably lying is a skill that law enforcement people have, and most of us don't. Interrogating is one thing, spotting the lie (or the inconsistency that leads to spotting the lie) is another skill entirely. I have a colleague that is scarily good at this.
- AlbertCory 4y ago
  Yeah, it would be a fun course to take, for sure (it's offered, I found out).
  - CSMastermind 4y ago
    I'd be skeptical of courses like that. Science has repeatedly found no evidence of this being an ability that you can learn. There's an entire industry peddling pseudoscience around it but there's basically no evidence that it works. See this recent Skeptoid for a good summary: https://skeptoid.com/episodes/4836 https://skeptoid.com/episodes/4836 That episode quotes an opinion paper in Frontiers in Psychology, which I'll also do here: > Is the rational course simply to drop this line of research? ...We have now sufficient evidence that there are no specific non-verbal behavioral signals that accompany lying or deceitful behavior. We can safely recommend that courts disregard such behavioral signals when appraising the credibility of victims, witnesses, and suspected offenders. For psychology and law researchers it may be time to move on.

whywhywhywhy 4y ago

I’m convinced every single person who is in control of these rules does insider trading.

jeffbee 4y ago

A quarter million bucks. Peanuts. With a director's comp and Apple's performance all this guy had to do was vest and hold, sell during legit trading windows, walk off with a hundred million easily.

jiveturkey 4y ago
$600k. There was both profit taking ($250k) and loss avoidance ($350k). Still peanuts.

logicalmonster 4y ago

This will not be a popular opinion, but just to give my random 2 cents. I theorize that the best way to solve the fairness issue of insider trading is to make it legal, but incredibly transparent. There is no way to catch the overwhelming majority of the actual insider trading that happens short of a dystopian SEC that continuously monitors everybody's phone calls, movements, emails, and all of their finances or just banning employees of publicly traded corporations from investing in their hard work, which also seems unfair. The best way to benefit the public is for price speculation by insiders to be telegraphed either in real-time, or preferably with advance notice, to any member of the public. If Joe Sixpack working at Apple wants to buy or sell stock or options the day before earnings (or any other day) based on some knowledge he has, I'd say it should be legal. He should just have to report that intent to some SEC website. Any member of the public should be able to go to some well-designed SEC website the day before and see that Joe along with 465 other employees plan to buy XXXX calls. If insiders want to trade in publicly traded companies, people should be able to have data on that to notice patterns and benefit from this information. If they decide they want to sell some stock, that should be reported at least in real time, or preferably with at least 1 day notice. If the goal is to benefit the greater public, the information should be designed to flow to the public. This pre-knowledge of their trades is the rule I especially want to impose on the corrupt legislators, some of whom are known as suspiciously good traders for senile old people. The rules that they can wait 30 days before disclosing their deals are BS. They should be reported at least in real-time, or preferably at least a day before. This seems like a small price to pay for making the rules that pick the winners and losers in the marketplace, as well as the overall direction of the economy.

thrwyoilarticle 4y ago
I'm surprised it's not a popular opinion. It seems to fit well with libertarian/laissez-faire ideology. If it was legal, retail might better understand that they're less knowledgable about a stock than the insiders. Instead we have the compromise where retail believes insider trading doesn't happen but it's actually rampant and retail are the least likely to benefit from it.
- 4y ago

mzs 4y ago

indictment of Gene Levoff linked at the bottom: https://www.justice.gov/usao-nj/pr/apple-s-former-director-corporate-law-admits-insider-trading https://www.justice.gov/usao-nj/pr/apple-s-former-director-c...

johnson98 4y ago

[dead]

acqbu 4y ago

that pretty much sumps up apple

jiveturkey 4y ago

This cannot be the whole story. This guy is a lawyer, and not just some rando junior lawyer in the company -- one who actually reviewed financials before publication. How can it possibly be the case that he wouldn't be aware that his (and his family's) trades are monitored? And for relative peanuts. Reminds me of the Netflix VP.