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Earlier reports from The Wall Street Journal were confirmed this week: Apple (Nasdaq: AAPL  ) chief executive Steve Jobs had a liver transplant two months ago at a Tennessee hospital.

"He received a liver transplant because he was the patient with the highest MELD score (Model for End-Stage Liver Disease) of his blood type and, therefore, the sickest patient on the waiting list at the time a donor organ became available. Mr. Jobs is now recovering well and has an excellent prognosis," Dr. James D. Eason of Methodist University Hospital Transplant Institute said in a statement.

Someone should pay for hiding material information like this. But it's not obvious that anyone will -- except perhaps for those who bought shares without understanding Jobs' health status.

Cue the chorus
I'm not the only one who thinks that the board failed to disclose a material event. Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) chairman Warren Buffett said as much during a recent CNBC interview.

"If I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell ... the Berkshire shareholders about it," Buffett said. He continued:

I work for 'em. Some people might think I'm important to the company. Certainly Steve Jobs is important to Apple. So it's a material fact. Whether he is facing serious surgery or not is a material fact.

While Buffett didn't explicitly say so, the implications of his finger-pointing are clear: Apple's board didn't do its job. At least one of the Journal's editors agrees.

"They have an obligation to disclose," the Journal's Deputy Managing Editor, Allan Murray, said in an interview with Yahoo! Finance TechTicker. "When you become a public figure, and CEOs of public companies are public figures, you lose some of your privacy rights and have a certain obligation to let people know what's going on. I think Jobs gets a pass [that] frankly CEOs of other public companies wouldn't get under similar circumstance."

Murray's comment stings like an indictment. I'm an Apple shareholder, and I've given Jobs and Apple the benefit of the doubt too many times. On Monday, I wrote about how investors didn't really care that Jobs had undergone a serious and possibly life-threatening procedure. True, but that wasn't really the point of the Journal's story. Who cares if they weren't actually concerned? They should be concerned. Apple has been rotten to the core when it comes to disclosure.

Stopping the stiff-arms
The SEC has already taken notice. Back in January, Bloomberg reported that the SEC was investigating whether investors had been misled by Apple's disclosures -- or lack thereof -- of Jobs' health problems. The company remained similarly tight-lipped in 2004, when Jobs secretly underwent an experimental treatment for pancreatic cancer.

Each time, the board has allowed Jobs to maintain his privacy, ignoring the concerns of shareholders. But this incident is more galling because of what Apple co-lead director Arthur Levinson said in February, during Apple's annual meeting of shareholders.

"We believe we have met all disclosure obligations," Levinson said. "Nothing has changed. Succession planning is something this board takes up regularly. You can assume we will do that responsibly."

No, sir, I can't assume anything. When you hide news of a liver transplant from shareholders, you are neither responsible nor trustworthy. Were the laws of the land tougher, you might be fitted for an orange jumpsuit.

Put it this way, Mr. Levinson: If you had been a candidate for a liver transplant before the Roche deal, would the shareholders of Genentech have wanted to know? I think you know the answer. We all do.

Prepare for a civil action
But we shouldn't expect the SEC to do much here. Hundreds of bankers should go to jail, but in the midst of a financial crisis caused by at-best-irresponsible stewardship at AIG (NYSE: AIG  ) , Citigroup (NYSE: C  ) , Bank of America (NYSE: BAC  ) , and Wells Fargo (NYSE: WFC  ) unit Wachovia, precious few seem destined for the Big House.

And remember: It took years for the government to put away ex-Qwest (NYSE: Q  ) CEO Joe Nacchio for insider trading, and his case could still go to The Supreme Court.

The best we can hope for, it seems, are civil fraud prosecutions of the sort the SEC is pursuing against former Countrywide CEO Angelo Mozilo and two other former executives. Mozilo is accused of cashing out $140 million in stock to avoid a crash he allegedly knew was coming.

Why it's not the same, but should be
"Fraud" may be too strong a word for what's occurred with Apple. But even if fraud were on the table, neither Jobs nor any board member has sold shares over the past six months. Only two Apple executives have cashed in stock since January, according to SEC filings. Senior Vice President Bertrand Serlet sold 10,000 shares in April, and Controller Betsy Rafael sold 7,198 shares in early May.

What's more, investors were fully aware that Jobs was suffering from health issues when he stepped aside for Tim Cook. The surgery took place during his leave. If no money changed hands, and investors knew that Jobs was sick, what's the big deal?

Well, for one thing, there's a huge difference between "sick" and "you're-near-enough-death-that-you'll-need-a-liver-transplant sick."

Timing is also an issue. The Journal story ran on Saturday. On Monday, Apple released iPhone 3G S sales figures without commenting on the Jobs story. See the lunacy here? Apple has, in effect, declared that iPhone 3G S sales are more important -- more material -- than the near-death experience of its co-founder and CEO. I'm not buying it.

No one is going to jail for this, but in a better world, someone would be. Until a board member is fitted for an orange jumpsuit, it'll be okay to get away with these "we'll tell you what you need to know, when you need to know it" distinctions.

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Fool contributor Tim Beyers had stock and options positions in Apple and a stock position in Berkshire at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool also owns shares of Berkshire and is on Twitter as @TheMotleyFool. Its disclosure policy is exercising its Fifth Amendment right to not answer any further questions.

Read/Post Comments (25) | Recommend This Article (22)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 26, 2009, at 4:14 PM, neal157 wrote:

    " ... -- except perhaps for those who bought shares without understanding Jobs' health status." ---- Yes, they only made a 70% profit during his absence. You're an idiot.

  • Report this Comment On June 26, 2009, at 4:19 PM, wuff3t wrote:

    So Tim, just out of curiosity, are you so unhappy with the Apple board's actions that you're going to sell your shares? Or are you prepared to tolerate owning shares in a company you feel misleads you?

    Not trying to start an argument, I'm just intrigued to know how deeply this disturbs you?

  • Report this Comment On June 26, 2009, at 4:19 PM, wadawin wrote:

    Are you certain Steve Jobs is responsible for everything that should matter to Apple shareholders? Listen to this:

  • Report this Comment On June 26, 2009, at 4:26 PM, Emperor2 wrote:

    I thought that Jobs was on Medical Leave at the time of his transplant. He was not responsible in any way with running Apple. He was gone. Anyone that did, or did not, purchase Apple stock because of someone that was not there, is a fool (lower case). When someone is on medical leave, there is a presumed return time. However, as anyone that has had to deal will illness knows, estimated return time and actual return time may be radically different. I have no problem with the non disclosure of the liver transplant. He went on medical leave for approximately 6 months; he returned when he was projected to return. We were given true, accurate information as to he was on medical leave and when he would return. If the medical leave was for an inoperable or terminal condition, I would agree investors should have been told. It wasn't. Complain about something where you have a complaint. You don't have a complaint on this.

  • Report this Comment On June 26, 2009, at 4:30 PM, kpinvest wrote:

    Hahaha, any time there's an Apple bashing story or a Google bashing story, the comments flow like tears.

    It's great. Every single time.

  • Report this Comment On June 26, 2009, at 4:34 PM, JamesNHollywood wrote:

    I hate reading this junk. Every intelligent investor knows that Steve Jobs health was baked into Apples price for months before he took his leave of absence.

    Anyone that complains about this is actually just kicking themselves for not buying 6 months ago. The smart guys that bought on Oct 3rd for a 30-day ride (and 10% gain) and bought again in the middle of January would have almost doubled their investment by now.

    Besides, Steve Jobs is an extremely private man ... who is to say that Apples board even knew he was on a transplant list? Leveling that sort of unconfirmed allegation is purely speculative and should be entirely dismissed.

    Jobs was sick, he's better now ... buy more Apple and ride it to $165 - $170 by years end.

  • Report this Comment On June 26, 2009, at 4:35 PM, xorcist wrote:

    It's clear to me that you have no idea what you're talking about. First you say there should have been disclosure, then say it's a material fact. But neither you, Alan Murray, or even Warren Buffet are the arbiters of what is or is not material and must be disclosed; that's entirely the purview of the SEC. Alan Murray isn't a member of the SEC, so he can't claim any special knowledge or expertise in this matter, either.

    And Steve Jobs never "stepped aside" for Tim Cook; he took a well-publicized leave-of-absence to focus on recovering from his ailment.

    Maybe they should have disclosed the liver transplant sooner, but they didn't. If you don't like that, you can petition your congressional representatives for more stringent and clear-cut disclosure requirements; only they can change those.

    But then you go off the wall and claim this was material because Steve Jobs was suddenly "near death", when in fact he was never in that position. That's you trying to impose your opinion by stating a falsehood. What does that say about you?

    When you actually learn how the industry and the SEC works, you might have something worth reading. As it stands, this is nothing but cheap tripe, written by a know-nothing.

  • Report this Comment On June 26, 2009, at 4:36 PM, carla01j wrote:

    This is one fool's opinion, obviously not shared by the investing community as a whole. Why? Because the Wall Street Journal "news" on Job's transplant and recovery broke on Monday. On Monday, the stock closed at 136.95. Today the stock closed at 142.40. Hardly an indictment of the Apple board.

    BTW, using the chart in this article and by clicking the links to Berkshire Hathaway in the article, it seems that both BRK-A and BRK-B are down about 30% since July 08, while Apple is down about half that much (15%). So which CEO (or acting CEO) has done a better job?

    And finally, yes; blockbuster sales of a new product are more important than news that the CEO has successfully recovered from surgery.

  • Report this Comment On June 26, 2009, at 5:01 PM, gslusher wrote:


    Are you an attorney specializing in securities law? If not, why are you giving an opinion on a legal issue? It's one thing to suggest that Apple "should" have released information, yet another to say that they violated the law. In some states, that may be grounds for libel.

  • Report this Comment On June 26, 2009, at 5:17 PM, andersj9 wrote:

    "It's clear to me that you have no idea what you're talking about. First you say there should have been disclosure, then say it's a material fact."

    It is both. Before you get up on your high horse, maybe do a little research. A material fact with regards to a publicly traded company is any known truth which may directly hinder a buyer from buying the stock, and by order of the SEC they are to all be disclosed. And to say Jobs wasn't near death when he got a liver transplant? Most people on the transplant list die before they get a liver, and many don't survive surgery. I think it might be you who has no idea what you're talking about. Sure it all turned out good and well, but if Jobs had died, the two insider sellers (those privy to info not available to the public) would have definitely been indicted by the SEC, and the stock price would not have looked as pretty as it does now. Very cut and clear SEC regulation. I 100% agree with the author.

  • Report this Comment On June 26, 2009, at 5:55 PM, er999 wrote:


    Why don't you sell your shares and shut the F__k up?

  • Report this Comment On June 26, 2009, at 6:13 PM, LFransson wrote:

    "Apple has, in effect, declared that iPhone 3G S sales are more important -- more material -- than the near-death experience of its co-founder and CEO."

    Say what? Hasn't TMF always been more concerned with how a company is run to benefit its shareholders than with who is running it?

    Apple's CEO announces to the world that he's taking a six-month LOA due to health issues and leaves a proven, competent and capable executive to run the show in his stead. The company continues executing its plan and releases great news about the sales of its newest product. Doesn't this provide some evidence that Apple is more than Steve Jobs? This is great news!

    Get over the man crush on Steve Jobs and focus on the business. That the business continues to do well even in the absence of its famous CEO should be an indication that the company is ready for the day when that CEO goes to the great boardroom in the sky, which should make us all very happy.

  • Report this Comment On June 26, 2009, at 6:59 PM, SKRMBA wrote:

    Has everyone in the USA gone completely f*cking mad?

    The stock has soared during Jobs' medical leave.

    Are all of the financial bloggers so out of material, or rushing out the door to get to free buffalo wings and happy hour prices, that they have lost the plot?

    I have made 80% ROI in 6 months on my APPL. In case you have to take your shoes off to calc this on an annual basis, that'll be 160%.

    Write some news, or just go get plowed.

  • Report this Comment On June 26, 2009, at 7:22 PM, Vorais wrote:

    Not one to usually post, but this article feels so wrong.

    First of all Steve Jobs did announce he was going to be on medical leave for 6 months. Most people do not take 6 months to recover from the flu and no decent over achieving CEO takes 6 months for hip replacement surgery. So in a sense the public was well informed that the CEO was out of an extended period of time for a serious medical issue.

    Second of all it is against Federal law to disclose living patient information, even if that person is a CEO or public figure. Most times it is released by either the individual or the family, but it is not required. I am sorry to say but Steve Jobs' health is not a matter of public knowledge by law even if he is a CEO of a public company.

    Thirdly, even with Steve Jobs out for 6 month, AAPL stock has gained ground on valid reasons and has preformed well above S&P 500 stock averages.

    Fourthly, product releases have occured on time during his absence by all reports on the various Apple rumor sights.

    Tim, your last part of the article witht eh heading "Why it's not the same, but should be" pretty much destroys your own argument. I know you were trying to counter point these but your reasoning is weak (and that's being kind.) I wonder if you sold shares at a major loss expecting a different outcome or are kicking yourself now that you didn't buy more when the stock was much lower because you though Steve's illness was going to have a larger impact on stock than it did. Btw, I purchased stock back in January with knowledge that Steve Jobs was ill and am more than happy that I did.

  • Report this Comment On June 26, 2009, at 7:46 PM, jonwongoodwon wrote:

    I don't understand what you think they should pay for.

    If the stock went down, maybe you would have some sort of remote point, however invalid - but it went up, and again today. So perhaps, using your logic, you should consider paying Apple for the profit you have received?

    Or did you short them, and that is why you are so pissed off?

    What are you doing on an investing site?

    Go to a whiners site!!

  • Report this Comment On June 26, 2009, at 7:47 PM, TMFMileHigh wrote:

    Thanks for the comments, all. I'll try and address specific questions or concerns in a follow-up by Monday.

    For now, and since this article is about disclosure, here is a detailed peek at my Apple holdings. (And no, I was not asked to do this nor am I required to.)

    * Shares purchased at an avg. price of $98.83 apiece in mid-October.

    * 2011 LEAP option with $85 strike price, also purchased in mid-October.

    Also, no: I won't be selling. More on why in a separate comment or article.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On June 26, 2009, at 10:12 PM, elpy wrote:

    should the board also disclose that SJ has a tendency to drive fast, may not always wear a seatbelt, and can pass away at any time by not looking both directions before crossing the street? Next time a CEO goes shark diving, y'all make sure we hear about it.

  • Report this Comment On June 26, 2009, at 10:36 PM, RipRagge wrote:

    Hi. I own a few shares. Actually I own four times as many shares as I bought in 1999 at a split adjusted $5 per share.

    An Apple investor who thinks he's getting reamed by the company would seem to be a little unclear on the whole concept of investing.

    An Apple trader who wants to see fluctuations for short-term gains needs a constant stream of rumors, opinions, and innuendo masquerading as news to fuel the fire. Full disclosure is only valuable to traders – not investors.

  • Report this Comment On June 26, 2009, at 11:58 PM, bullheart5042 wrote:

    If you are so unhappy with Apple and Steven Jobs, sell your stock and find another investment. If and when he eventually passes on, Jobs might be missed for awhile, but graveyards are filled with indispensable people...the stock price is high...what are you complaining about?

  • Report this Comment On June 27, 2009, at 4:44 AM, AZ123 wrote:

    Hi Tim,

    Roger McNamee, whom you taunted in your article "Palm Pre: Dead on Arrival?" made $18.3 million dollars in profit today from his Palm stock. (Friday 6/26)

    I made over $20,000 today in profit from my Palm stock.

    This is why readers of your article must not pay attention to your inability to advise on any stocks.

    Here's a revelation for you: Palm will be at between $25 - $30 per share by December.

    Why? it's very obvious. It's just you who can't see what's clearly there. Figure it out.

    Have a great weekend. I know I will as I count my now over $160,000 in Palm profits...all thanks to me and not to you...


  • Report this Comment On June 28, 2009, at 12:02 AM, rfaramir wrote:


    I give you the benefit of the doubt on your intentions and think you should not be castigated by many comments above. I read your analysis eagerly as you are a competent writer on Apple and other tech stocks.

    I do agree with them that Apple properly disclosed what it needed. I'm no expert, but I suspect that mere regulations on material disclosure are trumped by LAW against disclosure of patient medical information, especially once Jobs was out of the picture officially.

    I sympathize with wanting more info (I too am long AAPL), but I disagree that we are entitled to it.

    I disagree with some comments above implying that the medical outcome makes a difference in the morality of their non-disclosure choice. It was either right or wasn't; the outcome of the surgery doesn't affect how one judges their choice. It may have made a difference as to whether enough people would get mad enough to sue, but that's a different story.

  • Report this Comment On June 28, 2009, at 6:01 AM, waterpig222 wrote:

    I have never been to this site before but does any one find the URL to be surprisingly fitting for the topic/author?

  • Report this Comment On June 28, 2009, at 8:40 PM, Puffin100 wrote:

    The company and the SEC have no right to the disclosure of Steven Jobs medical history or any other part. There is a more important law in this matter called HIPPA, that protects our right to medical privacy.

    What you should be writing praise of the medical professionals in Tenn, that protected Mr. Job's privacy and his right to heal in privacy. How often do we hear about celebrity's medical records being leaked to the public, this is what truly is illegal. Also the requirement of a company to release an employee's medical history.

    So SEC and you greedy investors butt out. I own Apple and work in the medical field I can sacrifice a little insight into a company for someone's medical privacy. Congratulations to you Steven Jobs, your docs, RNs, PT staff and everyone helping you recover for fighting the cancer, getting your transplant, and protecting your privacy.

    Shame on those who wants to sacrifice his privacy.

  • Report this Comment On June 30, 2009, at 10:05 AM, Babble100 wrote:

    Buffett says a CEO is our employee. Well then. By law, any employee has the right to keep his medical issues private.

  • Report this Comment On July 02, 2009, at 12:45 PM, TMFBent wrote:

    good article, Tim. The Apple board is rotten, and has been for a while. They whitewashed the options backdating too. Sooner or later, this lack of leadership and oversight will matter.

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