Ex-Apple lawyer in charge of stopping insider trading charged with insider trading

Exec told workers not to trade Apple shares using inside information and then did it himself, says the SEC.
Written by Liam Tung, Contributing Writer

Gene Levoff, a former senior Apple lawyer in charge of insider-trading compliance, used nonpublic earnings information to trade Apple shares ahead of three quarterly earnings announcements, according to the SEC. 

The 45-year-old former corporate secretary and director of corporate law at Apple allegedly made $227,000 in profits and avoided $377,000 in losses using inside information and trading shares during Apple's quarterly 'blackout periods', a window around earnings announcements when execs with access to nonpublic information are banned from trading. 

Levoff, who was fired in September, is accused by the US Securities and Exchange Commission of selling 77,000 Apple shares worth about $10m in July 2015 after he learned that Apple would miss analysts' third-quarter estimates for iPhone unit sales. 

In the days after the announcement, Apple's stock fell more than four percent, wiping off $32bn in market value for other investors, while Levoff escaped $345,00 in losses, according to the SEC's complaint

As director of corporate law at Apple, Levoff also had a hand in revising the company's insider-trading policy and is accused of trading during blackout periods, even after warning relevant fellow Apple employees not to deal in Apple shares until the blackout ended. 

Levoff joined Apple in 2008 as director of corporate law. From 2013 until his termination, he was senior director of corporate law at the company. For most of his employment at Apple he was also on its disclosure committee, which assisted the CEO and CFO in fulfilling their responsibility for oversight of company earning and SEC disclosures.    

He gained access to nonpublic information through his position on Apple's disclosure committee, which reviewed earnings announcements and SEC filings before they were published.   

"Levoff's alleged exploitation of his access to Apple's financial information was particularly egregious given his responsibility for implementing the company's insider-trading compliance policy," said Antonia Chion, associate director of the SEC's Division of Enforcement. "The SEC is committed to pursuing insiders who breach their duties to investors."  

SEE: IT pro's guide to GDPR compliance (free PDF)

One day before Apple's fourth-quarter earnings announcement in October 2015, Levoff then bought 10,000 shares of Apple stock based on inside information that Apple would beat analyst estimates, according to the SEC. Apple's share price rose four percent in the days after, and Levoff then sold the shares, netting him a profit of $4,700. 

The third illegal trade he is accused of happened during the lead-up to Apple's April 26, 2016 earnings announcement after he viewed an SEC 10-Q form that revealed Apple would report its first year-over-year revenue decline since 2003. 

Before the announcement, Levoff sold 4,000 Apple shares, and when the quarterly earnings were made public, Apple's stock dipped six percent. On that occasion, Levoff avoided $32,000 in losses. 

He's also accused of making two trades using inside information in 2011 and 2012 that netted him $245,000 in profits.

Levoff now faces fraud charges filed by the SEC as well as criminal charges filed by the Justice Department.  

The SEC wants Levoff to hand back gains from ill-gotten trading profits and is seeking a permanent bar on him serving as an officer and director of other companies. 

If found guilty by the Department of Justice (DoJ), he faces up to 20 years in prison and a $5m fine. He's due in court to face the DoJ charges on February 20.

According to Bloomberg, Kevin Marino, the lawyer representing Levoff, said he is reviewing the SEC's civil complaint and the criminal charges.

"We look forward to defending him with respect to these allegations," Marino said.

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