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Apple Broke the Law By Lying About Steve Jobs Health

By Leander Kahney (8:20 am, Jun 23 2009)

paul_argenti

Paul Argenti

Apple broke the law by lying about Steve Jobs health, says a top marketing professor.

But whether the Security and Exchange Commission has the “balls” to prosecute is unclear.

Paul Argenti, Professor of Corporate Communication at Tuck School of Business at Dartmouth, says that Apple’s communications about its CEO’s health violated the SEC’s full disclosure regulations.

The SEC’s Regulation FD requires “full and fair disclosure by public companies,” but Apple has done neither, says Argenti. At first, Apple said Jobs had a “nutritional imbalance,” but on Friday the Wall Street Journal disclosed that he has undergone a liver transplant.

“The difference between a nutritional imbalance and a liver transplant is huge,” said Prof. Argenti to CoM by phone. “If this is not a legal issue and a Regulation FD issue, I don’t know what is.”

Argenti said Apple clearly knew months ago that Jobs would have to undergo life-saving surgery and had a legal obligation to disclose that.

“The law is very clear — full disclosure of material information,” said Argenti. “If a CEO’s liver transplant isn’t material, what is? But whether the SEC has the balls to do something about it, we’ll see.”

The SEC is reportedly already looking into the company’s handling of Jobs’s health disclosures.

Experts argue that shareholders are legally entitled to information that has material effect on company — and that a CEO’s health is material, especially one as closely tied to the company as Jobs is.

In December, Jobs said he was suffering from an easily treatable hormone imbalance; less than a week later, he said he was taking six months medical leave because his medical issues were “more complex.”

Argenti said the biggest issue is the ethics and the reputation of the company. Apple has severely damaged its trustworthiness and credibility.

“Clearly, this is going to affect not only Apple’s customers but employees that were lied to or kept in the dark about what was going on,” Argenti said. “Apple is one of the most admired companies in America and this is how they deal with this kind of news? It’s unacceptable, unethical and irresponsible to all constituents.”

Argenti said Apple’s miscommunication about Jobs undercuts its slick marketing and hurts its reputation with consumers and investors. “As a communications strategy, it makes no sense.”

“It’s going to be a big issue in the next few days, I guarantee it.”

Jobs was diagnosed with pancreatic cancer in 2004, which appeared to have been successfully treated until 2008, when Jobs lost weight rapidly. On Friday, the Wall Street Journal reported that he had received a liver transplant, suggesting that the cancer had metastasized to the liver.

So far, Apple has neither confirmed or denied the Journal report.

34 comments »

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About the author

Leander Kahney

is the editor and publisher of Cult of Mac, and author of three books about technology culture: Inside Steve’s Brain, the New York Times bestseller about Steve Jobs; Cult of Mac; and Cult of iPod. Leander has written for Wired, MacWeek, Scientific American, and The Guardian in London. Follow Leander on Twitter @lkahney and Facebook.

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Posted in Apple, News, Steve Jobs |

  • John T

    Leave it to a dork that looks like that…

  • Daver

    Someone broke the law of good fashion by letting this guy out of the house with those glasses.

  • Cameron

    Or perhaps what is unacceptable and unethical is that business analysts are obsessed with Steve Job’s health. He should be allowed to deal with health issues in private, I don’t care what the law says.

    And did this analyst ever think that perhaps Job’s own doctors weren’t sure what exactly was going on, and that the Liver Transplant was a last-resort procedure?

  • solar

    Paul Argenti’s eyeglass technician broke the law when they told him he looked good in those monobrow framed eyewear.

  • Keith Thomas

    This guy needs to get a life. He should stop getting so hung up about the arbitrary rules around the form of legalized gambling known as the stock market and have some compassion for a very sick man.

  • http://www.macpredictions.com Graham Bower

    It seems to me that this article raises two questions:
    - did Apple put out a deliberately misleading statement?
    - did Apple improperly withhold material information?

    I’m not a lawyer, but from a layman’s perspective, if the requirement for the surgery arose *after* SJ took his leave of absence, then the answer to the above two questions may be “no”.

    Without knowledge of the sequence of events, isn’t it impossible to know if there’s a case against Apple? Also, aren’t Apple’s disclosure obligations in this case determined by SJ’s official job title and responsibilities, rather than whether he is “closely tied to the company”?

    In terms of Apple’s credibility, I would argue that this has only been damaged if Apple’s actions have resulted in damage to shareholder value, which I would argue is not the case. It seems to me that the matter has been handled very carefully indeed, to protect Apple’s business.

    …but then, I’m a very partisan Apple fan!

  • Joe Anonymous

    The ‘expert’ is completely wrong.

    I deal with personnel issues every day and work for a publicly traded company, so I have some relevant experience. There are a number of flaws in his ‘logic’:

    1. HIPAA makes it illegal for a company to disclose employee health information. That alone protects Apple.

    2. Apple has incredible bench strength. Their continued strong performance in Jobs’ absence proves that the company is not dependent on any one person – and his health is therefore not material.

    3. Jobs was on a leave of absence, anyway. So his health is irrelevant.

    4. The professor apparently is clueless of a little concept called ‘time’. At the time Apple stated that the problem was a nutritional imbalance, the liver transplant had not occurred. So how could they be lying? It is not a lie to make a statement which future events changes.

    I’ll have to remember that if my daughter wants to go to Dartmouth Business School, to steer her away if this is the kind of logic their ‘experts’ use.

  • Lucas

    I believe part of that rule is that disclosure is required if a figure can’t do his/her job. Up until recently has there been any indication that Jobs was doing a poor job in his role as CEO. No. And when his health and the obsession with it got in the way, he took a leave and was forthcoming that it was for medical reasons.

    at the time that various statements were made they were likely the truth. at that point in time. Cancer and the aftermath isn’t like having a broken bone where you can x-ray the limb and know what is going on. Especially not the form of cancer that Jobs had. Yes it was the less common but ‘milder’ form but it would still wreak havoc in his body and sometimes in ways that would happen suddenly.

    he had a hormone imbalance and went to have it treated out of the limelight. which has the plus of showing naysayers that he doesn’t have to be there to hand hold the company. emails and ichatting are just fine (and you can bet they happened). while on leave the cause of that imbalance may have been discovered and perhaps yes it was a liver problem. As he was no longer the man in charge there was no need to speak up until after the results were in. had he been unable to return as previously stated, then they would have been in a position to speak up.

    as for the ‘no comment’ Apple is dammed no matter what. if they confirm it, the stock crashes. if they deny it, they are liars, Jobs is on his death bed and the stock crashes.

  • Scott King

    This is ridiculous nonsense. Everyone knows Steve Jobs is having health issues. The “nutritional imbalance” was the prognosis last year when doctors still weren’t sure what was going on. Later Apple announced that the health problem was “much more serious” than a nutritional imbalance and it required the CEO to be away from his position to recover. Since the CEO was away from the position an interim was named. Should Mr. Jobs have passed away (or not be able to return) the interim would go on running the company until the replacement was made official. Full disclosure complete.

    I am an Apple shareholder and I’m certainly concerned about Mr. Job’s health, he is a great visionary and asset to Apple. However, he is not the only person capable of running Apple and continuing the vision.

    Paul Argenti is being an alarmist probably for motives that push his own personal agenda rather than show concern for Apple shareholders. The SEC is not a tool for individuals to manipulate into conducting corporate espionage or furthering political agendas.

    Should every health report for every public CEO be published in the Wall Street Journal? Do we need to know if their cholesterol is up this visit. Whether they quit smoking or went back to it. Whether they need Viagra or Cialis? Whether they are going under a procedure to have a vasectomy? Eew!

    The gory details are a private matter. If Steve Jobs dies, expect Apple to disclose it. If he is away from him job, expect them to disclose it. Until then he’s doing an awesome job and going through a live transplant (if true) is enough strain without having to be called a criminal by some Professor Idiot.

  • Ken Spencer

    What part of “Apple broke the law by lying about Steve Jobs health, says a top marketing professor.” makes a Marketing Professor an expert on legal issues?

    My car mechanic thinks Apple didn’t break the law.

  • Ken Cohen

    I agree with most of the posts so far.

    Apple announced Steve Jobs’ medical condition. They announced he was taking temporary leave of absence – he would not be acting as CEO until he returned – and Tim Cook replaced him.

    They have no obligation to delve into what kind of treatment Jobs would receive or will receive, nor do they now have to announce what the prognosis is for the future. Even a CEO is entitled to a reasonable degree of privacy.

    I don’t see how anyone made or lost money as a result of this chain of events. And I don’t see why lawyers should have a field day litigating on behalf of stock speculators. Leave Mr. Jobs alone and let Apple go about its business.

  • Gazoobee

    It’s already been said rather eloquently above but I have to say this is alarmist nonsense.

    Perhaps what hasn’t been said is that this article is also alarmist nonsense and obvious click-bait. While all the other sites are reporting this as (Argenti) says that this *may* have been illegal, CultOfMac chooses to run with “Apple broke the law.”

    This kind of irresponsible follow-on reporting (to what is originally a self-serving puff piece), causes more problems than any secrets that Apple might be keeping. when you mangle the news and then pass it on to thousands of others you are not doing journalism at all and are just a raving dishonest fool. congrats! :)

  • CaryMG

    A hear a coroner once say that the liver is really the “heart”, if you will, of the body.
    “If your liver goes, it’s time to call Home Depot”, he says.
    He means for a shovel.
    To bury you.

    Steve is very, very, very ill.
    After the transplant, t’s 5 years, MAX.
    That’s unfortunate.

  • Doug Petrosky

    Being the CEO of a public company does not open your personal life to the world! Medical matters are private! There is a reason a doctor can’t talk about them. Steve Jobs could leave Apple tomorrow without ANY reason and go to work for Microsoft, RIM or Palm as can ANY CEO of ANY other company. If investors are investing in a CEO, they are investing in a house of cards.

    At least that’s how I see it.

  • Bill

    HIPAA is a federal regulation/law. Personal info regarding your health cannot be revealed by the healthcare priders unless they are part of the care, such as a consult. Steve could have given the info himself, if required. However, he did when he proclaimed that his medical issues were “more complex.” Then he took a leave of absence and you know only part of the rest of the story. The SEC reg does not specify how much detail is required, but his illness was serious enough to need a 6 month leave of absence. It seems that he fulfilled all requirements by SEC and Mr. Argenti needs to go to law school. However I think that his glasses are fashionable, although they don’t work for him ;), but dammit Jim, I’m a doctor. not Mr Blackwell!

  • ChampagneBob

    Let’s get on with the important news of the day… this is all old hat…. the man was on medical leave and the company was under interim management and capable hands….. who on this earth did not know that Jobs had medical issues and it probably was one of the most reported issues on Wall Street….

    Attorneys and expert witnesses are angling for a payday…. it just isn’t going to happen… let’s get on to something more interesting like the economy or what is going on in Iran…..

  • Bill

    I found this, which suggests that Mr. Argenti is not correct, from here:

    http://www.businessweek.com/technology/content/jun2009/tc20090622_877379.htm?campaign_id=rss_tech

    Indeed, guidance from regulators—including the Securities & Exchange Commission—isn’t clear on how much and how quickly companies need to discuss the health of an executive, says John Coffee, a Columbia University law professor who specializes in corporate governance and securities law. “The SEC has assiduously avoided giving clear guidance on when the CEO’s health is material,” Coffee says. “Apple is probably an extreme example where the CEO’s health is very material. Walt Disney in 1950 would have been an equivalent.”

    This can be interpreted many ways, but it seems that the SEC does not specify or give ‘clear guidance’ to this issue. Jobs reported a problem. took a leave, so again, I think that he did what he was supposed to do. But what the heck do I know!

  • Peter Paul Sadlon

    There is also some question on the validity of the WSJ report. It may be true or it may be false but since it was uncited it really isn’t provable short of someone breaking their silence. For all we know it’s completely accurate Graham Bower & Joe Anonymous’s statements come into play. If not true, Jim Cramer did mention Apple’s silence make them a good target for dishonest speculators and reporters.

  • RT

    “Steve is very, very, very ill.
    After the transplant, t’s 5 years, MAX.
    That’s unfortunate.”

    I am 14 years post-op, and I’m still round… Check your facts. Most (70%) of liver transplant patients, are doing well after 15 years post-op

  • Fred

    Thanks to the commenters above who make way more sense than Prof. Argenti does.

    Also, link-whoring Leander Kahney deserves great scorn and ridicule; first, for not putting the headline in quotes; and second, for mailing in such a foolish piece that the first half-dozen readers have to take him to school on it. I’d bet my paycheck that Kahney knows quite well *everything* that’s been stated above by these intelligent, common-sense possessing readers, but was just too lazy to do his job. Maybe it’s about time he took a six-month leave of absence.

  • Anonmuz

    These people just want to take Apple apart like they did MS, they should know this stuff if they call themselves experts in their field cause it doesn’t take a college grad to figure the situation out if you’ve payed any attention to it.

  • Ballsofjustice

    I too am disgusted at looser Leander. Thanks for promoting crap like this. Attacking someone who is just trying to get well and with some dignity. You act like all the other gossip rags that just want to hound someone to no end. I don’t know what Steve did to you personally, but I hope he gets well
    and does it to you again.

  • Brad

    I don’t blame Apple at all. Apple is not Steve Jobs. Apple is made up of thousands of dedicated people creating the best products in the world. Leave Mr. Jobs alone.

  • http://hucbald.blogspot.com/ Hucbald

    “The Law” is garbage made up by lawyers to make money for lawyers. Much of the time it makes no sense, as in this situation. Jobs is a private citizen like any other, and his medical issues should be the business of nobody but himself and his family, and especially not of any lawyer or government agency.

    What a crock.

  • John Hess

    I don’tthink that Steve Jobs should be blasted for his health issues, as they are not of his creation. His personal health information is and should be protected by very strict laws that the SEC shouldn’t and cannot touch.

    Give the poor man a break…he obviously needs some time off!

  • Canis Major

    Who Else May not be Telling All?

    Let’s see, Roger MacNamee is a graduate of Tuck Business School and a major donor to the school (see “Glassmeyer/McNamee Center for Digital Strategies”).

    Roger MacNamee is also the head of Elevation Partners, who are invested in Palm to the tune of a couple hundred (?) million.

    Funny that after the weekend during which the iPhone 3GS outsold the Palm Pre by about 20 to 1 (compared to the Pre’s opening weekend) that a professor at Tuck should assert that Apple is breaking the law and challenge the SEC to do something about.

    The same professor then goes on to assert that Apple’s customers and employees will no longer be able to trust the company, having been treated so badly (and lied to!).

    Are those the same customers Palm and Elevation Partners are hoping will switch from iPhones to Pre’s? Are those the same Apple employees that Palm is so heavily recruiting to join Rubenstein at Palm?

    Seems just a little coincidental and cozy?

  • KenC

    Uhm, what does a “marketing prof” know about SEC rules? Second, this is about medicine. Anyone who knows anything about medicine knows, that there’s often plenty of differences in opinion amongst healthcare professionals, and the appropriate course of action. Third, Steve’s docs could have believed one thing at one time, and another at a later point in time. Doctors are not infallible. I come from a family of 4 doctors, so I know how fallible they are, they all went to the top Universities in the country.

  • AdamC

    This is the last time i read cult of mac … getting more irrelevant everyday.

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  • http://fretboardmag.com Kenny

    Shame you couldn’t have got a corroborating quote from an expert in the issue, like, say, a corporate lawyer. Just a idea…

  • Thomas

    This guy looks like a disgruntled PC user who’s always had a secret Mac-envy, and is pissed at the fact that Microsoft’s stock – in which he’s heavily invested – just sits there, year after year.

  • Armin

    Argenti to CoM by phone: “If this is not a legal issue and a Regulation FD issue, I don’t know what is.”

    I thought that Regulation FD was about SELECTIVE disclosure of material information?

    “The new regulation generally prohibits a public company from selectively disclosing material nonpublic information to (1) market professionals, such as analysts, brokers, investment advisers, and institutional investors, and (2) holders of the company’s securities.” In this case, “a company must make simultaneous public disclosure.”

    http://www.kjk.com/article_1.html

    Did Apple disclose anything to analysts, brokers, etc, without disclosing the same information to the general public?

  • Nemo

    Wow, every article I’ve seen so far that details this story has the comments section filled with shrill foam at the mouth iBoi Fanboi’s.

    Kinda hilarious seeing them get their panties in wad over anything that dare be said of their Dear Leader Kim Jong Jobs. Take a deep breath guys. Its just a corporation and he’s just another d!ck CEO.

  • DTangel9731

    Steve Jobs is Out of here,I know Ted Kennedy’s Docs an people keep saying he would recover an go on living to return to the Senate to vote on Health care. but look lo an behold Ted Kennedy is no longer with us, an is dead an buried soundlly next to his brothers,R.I.P. to him (sad).

    so tell me another reason why I should trust Apple the News his Docs ect. Steve Jobs is about to Die I know it an so do many others to. you cant stop the Divine Truth inside ourself it tells us Steve Jobs is about to Die an you cant change the way we feel about Knowing and Attaining were all right about it in our Spirit and Heart.