Apple Faces SEC Probe on Jobs Health Disclosure

The U.S. Securities and Exchange Commission is investigating Apple’s handling of CEO Steve Jobs’s health problems, according to a Bloomberg News report — with the SEC wanting to know how his condition went from “relatively simple” to “more complex than thought” in a week’s time.

The investigation hinges on what Apple’s board knew on January 5, when Jobs announced he had a “hormone imbalance,” and nine days later, on January 14, when he declared the problem to be “more complex” and that he was taking six months off work.

Since then, word has come that Jobs in fact was suffering from severe liver disease, enough to get him pushed to the top of a transplant waiting list. Since the transplant, Jobs has returned to quietly working part-time at Apple, with no further comment. While all’s well that ends well, the SEC still wants to make sure Jobs and company did not mislead investors for the sake of keeping Apple’s stock price high.

Its stock has oscillated in recent months, but so has the whole market. Apple closed the day on Wednesday at $137.22, up $1.82. On January 8, it was $92.70.

A spokesperson for the SEC could not confirm or deny any investigations. Apple (NASDAQ: AAPL) declined to comment.

Any investigation would likely come down to the argument of Jobs’s widely noted insistence on keeping his private life private versus the need for disclosure as the head of a publicly traded corporation.

Apple’s board has already made its choice once before — in 2003, Jobs told the board that he had been diagnosed with pancreatic cancer and then spent nine months trying to treat it using alternative methods. The whole time, the board kept his secret. When the alternative cures failed, the board finally prevailed on Jobs to have surgery, at which point his condition and successful surgery were disclosed.

So if Jobs did the same here — informed the board but not the public out of a desire for privacy — that could have some influence on charges and sanctions sought, but it won’t be “a get-out-of-jail-free card,” said Ross Albert, a former federal prosecutor and former SEC counsel, now a partner with the Atlanta law firm of Morris Manning & Martin.

The best factor on Apple’s side is the fact that shareholders did not revolt over the silent treatment they were given on Jobs’s condition. Had there been an uproar at the Apple shareholder meeting earlier this year instead of singing “Happy Birthday” to Jobs, it might have been a different story.

“It’s not an absolute requirement [to take shareholder silence into account], but if there’s a thought that shareholders were not harmed by the lack of disclosure, it’s a factor that informs the agency whether to pursue the case,” Albert told

On the other hand, the SEC, which is facing tremendous heat following the scandals of swindlers Bernard Madoff and R. Allen Stanford, may be feeling motivated to give Apple some kind of spanking for its obfuscation.

“I would say that a factor on the other side is the SEC takes the obligation to make full disclosure very seriously,” Albert said. “I could see them bringing some sort of minor case with a censure or some sort of low-level injunction just because they think they have to send the message that the requirements of federal securities laws have to be taken seriously.”

The SEC doesn’t have to prove causation or damages that a private litigant like a class-action fraud would have to show. All it has to prove is that statements contained material misrepresentations or omissions and that conduct was from a decision-maker at Apple, such as Jobs or the board.

The whole story is clearly unknown. It could very well be Jobs’s thought he did have a simple problem and received far more dire test results in the nine days between disclosures. If Jobs did disclose his condition to the board as he did in 2003, it takes him off the hook, legally — but now the board is on it.

“A major issue is going to be who knew what, when,” Albert said. “I would be surprised, but I could be wrong, if Steve Jobs made total disclosure internally to Apple. So management at Apple may have been playing catch-up, too.”

He figures this won’t be a lingering investigation, and that the SEC would like to get it wrapped up in about six months.

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