Apple
A pivotal question for regulators is what Apples board knew at the time of Jobss Jan. 5 announcement that he had a hormone imbalance and a Jan. 14 statement that he was taking a five-and-a-half month medical leave, said the person, who declined to be identified because the probe is confidential.
Jobs went on to have a liver transplant during his leave. SEC investigators want to be sure that Jobss January disclosures didnt mislead investors, the person said. Bloomberg News reported in January that the SEC had opened the probe.
“The issue here is: Did Apple or Jobs make misleading disclosures, tested by what they knew at the time?” said Robert Hillman, a securities law professor at the University of California, Davis. “A disclosure could be misleading if its a partial truth.”
The review doesnt mean the SEC will accuse Jobs or the company of wrongdoing, the person familiar with the investigation said. Apples lead directors, Art Levinson and Bill Campbell, were being briefed by Jobss doctors on his condition at the time, said another person familiar with the matter.
Corporate Governance
John Heine, a spokesman for the SEC, declined to comment. Apple also declined to comment, said Steve Dowling, a spokesman for the Cupertino, California-based company. Levinson, who is chairman of Genentech Inc., and Campbell, chairman of Intuit Inc., didnt respond to e-mails and phone messages seeking comment.
Apple fell $3.21 to $135.40 yesterday in Nasdaq Stock Market trading. The shares have gained 59 percent this year.
Corporate governance experts and lawyers have disagreed about whether Apple, the maker of the Macintosh personal computer and the iPod media player, has made sufficient disclosures this year about Jobss health. Some argue that since Jobs is critical to Apples future, his health is material information that should be shared with investors. Others argue that privacy laws trump investors right to know the details of his health.
Apple said last week that Jobs, 54, had returned to work. He will spend a few days a week at the office and the rest of the time working at home, the company said. Methodist University Hospital in Memphis said last month that Jobs had undergone a liver transplant there. Apple hasnt acknowledged the liver transplant or said why it was needed.
Murky Territory
One issue lawyers agree on: The law is murky when it comes to corporate disclosures about a CEOs health. That may make the SEC reluctant to press a case, said Peter Henning, a former federal prosecutor and SEC lawyer who teaches at Wayne State University Law School in Detroit. Regulators will probably focus on the two statements made by Jobs in January, he said.
When the CEO is a “luminary” and viewed as pivotal to the companys financial health and prospects, health information may be material to the business and therefore require disclosure, said Allan Horwich, a partner at Schiff Hardin LLP in Chicago. He wrote a paper this year advocating that the SEC adopt a rule requiring health disclosures for some CEOs.
Known Trend
“People think his creativity and insights and planning are so very important to the continuing operations of the company,” Horwich said. “If youve reached the stage where he is so sick that he goes to the top of the transplant list, thats significant.”
Jobss health has been the focus of investor speculation since he appeared thinner at a company event in June 2008. Apple first said Jobs was suffering from a “common bug.” The company later declined to comment on his health, saying it was a private matter, even as he appeared thinner at company events through the rest of the year.
Jobs said in the Jan. 5 letter addressed to the “Apple Community” that the cause of his weight loss was a “hormone imbalance that has been robbing me of the proteins my body needs to be healthy.” He said the treatment was “relatively simple.”
Accurate and Complete
While there has to be some measure of confidentiality around the health of executives, any disclosures need to be accurate and complete, said Jahan Raissi, a former SEC enforcement attorney.