The Securities and Exchange Commission on May 3, 2019 charged a New Hampshire-based company and its former CEO with misleading investors about the company’s ability to supply “sapphire glass” for Apple’s iPhones. The company, GT Advanced Technologies Inc., also is found to have misclassified more than $300 million in debt to Apple that resulted from its repeated failures to meet performance milestones.
According to the SEC’s orders, in the fall of 2013, Apple agreed to advance $578 million in four installments to GT in exchange for sapphire glass that met certain technical standards. The agreement was closely watched by the market and highly material to GT’s revenue, liabilities, and stock value. By late April 2014, GT had failed to meet the required standards, resulting in Apple withholding $139 million and giving it the right to accelerate repayment of $306 million previously advanced to GT. To avoid recognizing the debt as current, which would have had an immediate impact on its status as a going concern, GT took an unsupported, undisclosed position that Apple had breached part of the agreement, thus releasing GT from its performance obligations. Yet in second quarter 2014 earnings calls, then-CEO Thomas Gutierrez falsely stated that GT expected to hit performance targets and receive the fourth installment payment from Apple by October 2014. Gutierrez also provided unsupported sales projections, causing GT to misstate its second-quarter liquidity and non-GAAP earnings-per-share projections. Within two months, GT filed for bankruptcy, resulting in significant investor harm. It later exited bankruptcy and is now privately held.
“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,” said Anita B. Bandy, an Associate Director in the SEC’s Division of Enforcement, in a statement. “We will continue to hold chief executives accountable when they breach their most fundamental duty to make full and truthful disclosures to investors.”
Without admitting or denying the findings, GT and Gutierrez consented to the entry of SEC orders finding that they violated antifraud provisions of the federal securities laws. Each agreed to cease and desist from further violations and Gutierrez agreed to pay more than $140,000 in monetary relief.
The SEC’s investigation was conducted by Deena Bernstein, Eric Hubbs, and Carolyn Winters, with support from Angie Bailey and Alma Schaffer. The case was supervised by Douglas McAllister, Kristen Dieter, and Stephan Schlegelmilch.
Source: Securities and Exchange Commission
Apple sued by glass material producer over breach of contract in ongoing sapphire debacle – January 23, 2018
Tim Bajarin: Corning’s Gorilla Glass 5 may mark the end for sapphire screens – July 27, 2016
New Gorilla Glass helps prevent smartphone display smashes – July 22, 2016
Apple, GT Advanced and the ‘boule graveyard’ – November 20, 2014
Lack of experience, mismanagement doomed GT Advanced’s sapphire adventure – November 19, 2014
Court unseals GT Advanced documents: Apple says it ‘bent over backwards’ to help sapphire supplier – November 7, 2014
U.S. SEC opens investigation into Apple supplier GT Advanced – November 6, 2014
GT Advanced says Apple settlement will survive unsealing – November 5, 2014
Judge orders GT Advanced bankruptcy papers unsealed – October 30, 2014
Full list of GT Advanced articles.
He was fined almost as much as I lost. Doesn’t seem right.
Its the first time I had an investment dissolve into thin air. Totally pissed
Yep, lost my ass on that one.
Not terribly happy about it either.
Me too. I lost 100% of my investment. This SOB should be in jail. Isn’t the SEC supposed to protect the investor? What good are they then if the illegal profiteer walks away with a paltry fine after shafting people out of millions? Crap assed agency. Just like in the mortgage meltdown in 2007-2008 the crooks get a slap on the wrist. Only one person tried to blow the whistle back then and they and Greenspan had her fired.