A former senior lawyer at Apple who enforced its insider-trading policies pleaded guilty on Thursday to perpetrating an insider-trading scheme, which prosecutors said had involved making stock transactions before the company announced it fell short of iPhone sales expectations.
In 2019, the Justice Department charged Gene Levoff, who was senior director of corporate law at Apple until he was fired in late 2018, with using nonpublic information about Apple’s financial results that helped him avoid losses and collect profits while illegally making trades ahead of the company’s earnings reports.
Between 2011 and 2016, Levoff avoided losses of $377,000 before Apple released bad news regarding its iPhone business and collected profits of more than $220,000 before it released good news, according to documents filed in U.S. District Court in Newark. The transactions violated quarterly “blackout periods,” which prohibit trading by individuals with access to material nonpublic information.
In a 2015 example, Levoff sold $10 million of Apple stock before the company reported it would miss analysts’ unit sales estimates for the iPhone, helping him avoid losses when shares fell 4 percent on the disappointing quarterly results.
On several occasions, Levoff made the trades after sending an email to employees at Apple saying such trades are restricted, according to the initial complaint. Apple’s insider-trading policy said any individual with material, nonpublic information about the company was not allowed to trade until 60 hours after that information had been announced.
“This defendant exploited his position within a company strictly for financial gain that he would not have otherwise realized,” said Terence Reilly, the F.B.I.’s acting special agent for the Newark office, which led the investigation. “That’s called ‘gaming the system.’”
Levoff’s lawyer declined to comment. Apple did not respond to a request for comment.
In 2020, Levoff’s legal team filed a motion to dismiss the case, arguing that the complaint was unconstitutional because no law existed against insider trading. But Judge William Martini rejected the motion, saying that the argument was “incorrect” and that Congress passed laws to ensure “fair and honest markets.”
Before he was fired, Levoff reported to Apple’s general counsel. He was part of the company’s disclosure committee, a group that helped prepare Tim Cook, Apple’s chief executive, and Luca Maestri, its chief financial officer, before quarterly disclosures to investors. Levoff’s responsibilities at Apple included enforcing the company’s insider trading policy.
The counts of securities fraud in Levoff’s plea carry a maximum penalty of 20 years and a $5 million fine. Sentencing is scheduled for Nov. 10.
A separate suit by the Securities and Exchange Commission is still pending. The agency was seeking a judgment that would require Levoff to repay his gains from the trading.
Tripp Mickle is a reporter with the New York Times. Copyright, New York Times.