Third Class Action Launched Against Apple For Shareholder Fraud

by , 5:25 PM EST, October 30th, 2001

Earlier this month, two law firms launched class actions against Apple alleging shareholder fraud. This month, a third firm has launched its own class action against the company. Schiffrin & Barroway, LLP have launched a class action against Apple that largely mirrors the earlier two suits. From Schiffrin & Barroway, LLP:

Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Northern District of California on behalf of all purchasers of the common stock of Apple Computer, Inc. ("Apple") from July 19, 2000 through September 28, 2000, inclusive (the "Class Period").

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Schiffrin & Barroway, LLP (Marc A. Topaz, Esq. or Stuart L. Berman, Esq.) toll free at 1-888-299-7706 or 1-610-667-7706, or via e-mail at [email protected].

The complaint charges Apple Computer, Inc. and certain of its officers and directors with issuing false and misleading statements concerning its business and financial condition. Specifically, the complaint alleges that on 7/18-19/00, Apple introduced its new Power Mac G4 Dual Processor, G4 Cube and iMac personal computers, representing that they were exceptionally powerful, fast and attractive, coming with exceptionally attractive designs and containing new and revolutionary features. At this time, Apple represented that the development of these new products was completed, they were ready for mass production and would be available in quantity very shortly. Apple claimed this would result in Apple achieving strong revenue and earnings per share ("EPS") growth in its 4thQ F00 (to end 9/30/00) and F01. As a result, Apple's stock climbed to a Class Period high of $64-1/8 in early 9/00, when four top Apple officers sold 370,000 shares of their Apple stock for $22 million. Suddenly, just 20-25 trading days later, on 9/28/00, Apple shocked investors by revealing a huge 4thQ F00 revenue and EPS shortfall due to very poor sales to its education (K-12) market and poor consumer acceptance of its new personal computer products (some of which had been late to market, had defects and lacked features which were essential for market success), resulting in the accumulation of excessive inventories of finished goods in Apple's distribution channel and Apple having to cancel component part orders and, thereby, incur financial penalties. As rumors of Apple's troubles circulated prior to and then following Apple's shocking disclosure, Apple's stock collapsed from $61-3/64 on 9/20/00 to $25-3/8 on 9/29/00, continuing to fall to as low as $17 and then to $13-5/8, as investors absorbed the full impact of these shocking revelations, a stock decline that wiped out over $10 billion of Apple's market capitalization in just a few days.

Plaintiff seeks to recover damages on behalf of class members and is represented by the law firm of Schiffrin & Barroway, LLP, who has significant experience and expertise prosecuting class actions on behalf of investors and shareholders. For more information on Schiffrin & Barroway, or to sign-up to participate in this action online, please visit www.sbclasslaw.com.

If you are a member of the class described above, you may, not later than December 15, 2001, move the Court to serve as lead plaintiff of the class, if you so choose. In order to serve as lead plaintiff, however, you must meet certain legal requirements.

The Mac Observer Spin:

Three law firms, three class-action suits. There are legitimate cases for shareholder lawsuits in the US. Executives have been known to deliberately run up stocks, trade on insider knowledge, and do all manner of things that are immoral, unethical, and illegal. At the same time, there are far too many people who look for a scapegoat on whom to blame any adversity. Then there's the sharks that are perpetually swimming the legal seas looking for a victim on whom to prey. Companies get sued for spending too much money on R&D, for making investments that go bad, for making mistakes in the face of a changing economy, and all other forms of business actions that are simply a part of doing business.

There may well be merit to these class actions against Apple. If it turns out the company did deliberately run up its stock so that insiders could sell at a tidy profit, then the heavy hand of justice needs to come down from on high and smack them a good one. If, on the other hand, Apple simply had trouble getting processors from Motorola, or made incorrect projections on the popularity of the Cube, made a mistake in its handling of education sales, or, horror of horrors, actually saw lower sales because of a slowing economy, then these class actions are just wrong.

Considering the CEO of the company gets paid US$1 a year (plus a jet), and has most of his compensation in the form of now-worthless options because of the above series of events, it seems difficult to believe that Apple's executive ranks are guilty of shareholder fraud.