GT Advanced and Apple debacle carries on!
United States Securities and Exchange Commission (SEC) has launched an investigation into GT Advanced’s trading activity. The SEC has sent a letter to GT Advanced a month ago and was seeking some information regarding the trading activity using the company’s securities. It previously sent a letter back on January 1st 2013 looking for more data on the sapphire business and securities.
This comes after the news surfaced that GT’s CEO Thomas Gutierrez and COO Daniel Squiller had been selling off large amounts of stock. Some of the sales occurred in February 2014 just after it surfaced the company was facing production issues. It seems that Gutierrez sold off 9000 shares a day before the iPhone 6 was announced. This was part a pre-arranged Rule 10b5-1 Plan enacted in March. He earned about USD$160,000 but if you count all the other occasions that the CEO sold off his shares, he would have gotten about 10 million dollars.
Squiller on the other hand, sold about USD$ 1.2 million worth of stock in May this year and had plans to sell off more through out this year. He earned an additional USD$750,000 before GT Advanced’s filed for bankruptcy. This kicked off suspicion from the SEC.
GT Advanced and Apple agreed to a deal back in 2013 and this made GT Advanced’s stock begin to rise as rumors came out that Apple will using the company’s sapphire glass in the production of the iPhone 6 variants. When it was found out that Apple would not be using sapphire on the devices, stocks fell by a third two months ago. The partnership went array when GT Advanced failed to hit goals set by Apple and adhere to the Cupertino company’s contract terms.
Speaking of, the two parties tried their best to keep documents out of the public eye but the judge has ruled that the documents did not contain any trade secrets or confidential information and hence, would be mainly accessible by the public. The documents you can now get your hands on include an unedited affidavit from GT Advanced COO Daniel Squiller. The document shows more negative feelings towards the partnership. Apple allegedly attempted to use the “bait-and-switch” strategy, offering GT Advanced “an onerous and massively one-sided deal” in 2013. Originally, the tech giant actually agreed to buying sapphire furnaces and letting GT Advanced operate the furnaces. However, Apple allegedly started demanding a whole different deal which forced GT Advanced purchase the furnaces themselves.
GT Advanced didn’t bother on fighting the new terms because it has “invested months negotiating a sale contract with Apple while being effectively locked out of pursuing other opportunities with Apple’s competitors.” In addition, Apple reportedly told the company not to even try to negotiate as the tech tycoon doesn’t bother negotiating with suppliers. When GT Advanced executives were shocked at the terms, the CEO explains that Apple told them to “put on your big boy pants and accept the agreement.”
Apple previously submitted to courts to seal Squiller’s affidavit as the whole statement was “untrue, irrelevant and defamatory” and “goes far beyond what was reasonably necessary to describe the Debtors’ current financial situation and instead includes gratuitous characterizations of Apple’s motives, negotiating tactics and business practices.” This obviously was not agreed to by the court.
Another document that has been unsealed is the original privacy agreement that GT Advanced signed which gives the public an insight into how Apple deals with its suppliers. Documents referred to the deal between the two parties as “Project Onyx”. This document was under strict confidentiality terms with employees unable to refer to the project or Apple as anything other than the code names.The employees even had to go for training on confidentiality and security as well as sign a non-disclosure agreement. To up the security more, GT Advanced was forced to establish a qualified security team and have 24/7 surveillance, credential screening, tracking of all confidential supplies as well as the secure destruction of all scrap materials to prevent potential leaks.
Apple was able to audit records, inspect facilities, and interview personnel to ensure compliance, and any evidence of non-compliance with the non-disclosure agreement would result in a $135,000 “Security Fee” to pay for the cost of the audit and an increase in Apple’s security efforts.
This is just a glimpse of the other conditions Apple forced upon GT Advanced. The privacy agreement is most probably similar to all the contracts Apple supplier are made to sign to maintain high secrecy. Apple is one company that is known for wanting to keep everything it does under wraps. But it still sees a good amount of leaks. What do you think about the privacy agreement suppliers are asked to sign? A little bit extensive isn’t it?
That’s about the update we have on the on-going battle between GT Advanced and Apple. Let us know what you think about the whole debacle in the comment section below!