The SEC today announced it has charged GT Advanced Technologies and its former CEO Thomas Gutierrez with misleading investors about the company's ability to supply sapphire glass for iPhones. The company is also found to have misclassified more than $300 million in debt to Apple.
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 SEC says. By late April 2014, GT had failed to meet those standards, resulting in Apple withholding its final $139 million installment and demanding repayment.
On earnings calls in the second quarter of 2014, however, Gutierrez falsely stated that GT expected to hit performance targets and receive the fourth installment payment from Apple by October 2014. GT ended up filing for bankruptcy shortly after, which the SEC says resulted in "significant investor harm."
SEC associate director Anita B. Bandy:
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. We will continue to hold chief executives accountable when they breach their most fundamental duty to make full and truthful disclosures to investors.
GT later exited bankruptcy and is now privately held.
GT Advanced Technologies was expected to become a major Apple supplier, as it was supposedly able to manufacture extremely thin sheets of sapphire much more cheaply than current methods. For now, Apple continues to source non-sapphire glass from Corning in Kentucky for use in products like the iPhone.
