Probe of Ex-Apple Supplier Is Settled -- WSJ
May 04 2019 - 3:02AM
Dow Jones News
By Dave Michaels
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 4, 2019).
WASHINGTON -- A former supplier to Apple Inc. agreed Friday to
settle civil fraud claims that it misled investors about its
problems making scratch-resistant sapphire glass for iPhones.
GT Advanced Technologies Inc., which emerged from bankruptcy in
2016 and is now a private company, settled the Securities and
Exchange Commission's probe without paying a fine. Thomas
Gutierrez, GT's former chief executive, agreed to pay $140,000 to
resolve an investigation of him.
New Hampshire-based GT and Mr. Gutierrez settled the probes
without admitting or denying wrongdoing. An attorney for the
company and a company spokesman didn't respond to requests for
comment.
Jordan Hershman, an attorney for Mr. Gutierrez, said his client
agreed to settle "solely to end this matter." The SEC claimed that
Mr. Gutierrez "negligently made one alleged misstatement regarding
the company's expectation of receiving a future milestone payment,"
while the CEO also warned the payment might never materialize, Mr.
Hershman said.
The settlement comes five years after the company's venture with
Apple blew up.
GT's $578 million contract with Apple required it to produce "an
unprecedented amount of sapphire in boules that were over twice the
size of boules GT had previously produced," the Securities and
Exchange Commission said in a settlement order dated Friday.
GT had trouble meeting quality and delivery standards set by its
contract, the SEC said. After GT missed a milestone in late 2014,
Apple withheld a $139 million payment and gained the right to
accelerate repayment of $306 million it had already paid to GT, the
SEC alleged.
Instead of recognizing those liabilities as near-term debt, GT
accused Apple of breaching the terms of the contract.
The SEC said Friday that GT's accusations were hollow and
intended to cover up its need to recognize debt that would have put
its status as an operating company in doubt. GT entered bankruptcy
in late 2014, and at the time maintained Apple had engaged in a
"bait and switch."
The SEC said Mr. Gutierrez falsely stated on earnings calls in
2014 that GT had met performance goals and expected to receive an
installment payment from Apple. He also provided unsupported sales
projections, the SEC said, causing the company to misstate
closely-watched metrics such as its customized earnings estimates.
Mr. Gutierrez resigned as CEO in 2015.
"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 Bandy, an
associate director of enforcement at the SEC.
--Kimberly Chin contributed to this article.
(END) Dow Jones Newswires
May 04, 2019 02:47 ET (06:47 GMT)
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