Roger Fingas
The U.S. Securities and Exchange Commission on Friday charged GT Advanced Technologies and former CEO Thomas Gutierrez with fraud, accusing them of deceiving investors about its ability to supply sapphire for iPhones.
GT also misclassified over $300 million in debt to Apple, accumulated from its inability to meet multiple milestones, the SEC said. Without acknowledging or denying wrongdoing, both GT and Gutierrez have already consented to the SEC's findings, mostly avoiding punishment beyond a cease-and-desist order. Gutierrez will have to pay over $140,000 in fines.
"GT and its CEO painted a rosy picture of the company's performance and ability to obtain funding that was paramount to GT's survival while they were aware of information that would have catastrophic consequences for the company," wrote Anita Bandy, an associate director for SEC enforcement.
In fall 2013, Apple consented to advancing $578 million for GT, delivered in four installments. By April 2014 however GT was still unable to meet Apple's performance standards, leading to it withholding $139 million, with the option of speeding up repayment of the $306 million already delivered.
GT then accused Apple of breaching part of its agreement in order to be set free from milestone obligations and avoid recognizing debt as current, the SEC claimed. In a subsequent earnings call, Gutierrez nevertheless said that GT was expecting to meet its deadlines and receive its fourth Apple installment by October 2014. The CEO also made exaggerated sales projections, yet within just two months, GT made a surprise filing for bankruptcy. It reached a settlement for $439 million in debt with Apple by November 2015.
GT has since left bankruptcy, but is no longer on the stock market. A joint factory in Mesa, Ariz. has since been repurposed into an Apple data center.
Marko Zivkovic
Christine McKee
Malcolm Owen
Amber Neely
Andrew O'Hara
21 Comments
“...both GT and Gutierrez have already consented to the SEC's findings, mostly avoiding punishment beyond a cease-and-desist order. Gutierrez will have to pay over $140,000 in fines.“ And thats the big mistake. They walk away with a minor fine, when you've pocketed millions , $140k is pocket change, and no promise they won’t do it to someone else. They should have done hard time.
Big mistake Apple. Who would trust a company/company name with the word “Advanced” in it? This implies that all others without the moniker are inferior. In fact, they are so advanced that they handled their deal well. Quite advanced. Very advanced. Beautiful, clean, advanced sapphire ingot.
Although it ended up being a bad business deal (and I strongly agree with those who said Gutierrez should do time), Apple ended up getting their money back plus a free data center, so really they didn’t do too badly in the end. It’s a pity the technology turned out to be fraudulent, as it would have made a big and competitive difference to iPhones if the entire screen could ever have been that sapphire glass.
White collar crime — and the lack of meaningful punishments for it — is a serious problem in the US and needs to be addressed much, much more harshly by the various agencies. There needs to be strong punishment as a deterrent to fraudulent/criminal behaviour among the rich, not just the not-rich.