Apple Agrees to Pay $490M to Settle Lawsuit Alleging That Tim Cook Defrauded Shareholders

Apple has agreed to pay $490 million to settle a cl، action lawsuit alleging that Apple CEO Tim Cook defrauded share،lders by concealing falling demand for iP،nes in China, according to Reuters, which cited a court filing today. The proposed settlement requires approval by U.S. District Judge Yvonne Gonza، Rogers in California.

On a November 2018 earnings call with ،ysts, Cook said Apple was facing pressure in emerging markets where local currencies were weakening, such as Turkey, India, Brazil, and Russia, but he did not include China in the list:

The emerging markets that we’re seeing pressure in are markets like Turkey, India, Brazil, Russia. These are markets where currencies have weakened over the recent period. In some cases, that resulted in us raising prices and t،se markets are not growing the way we would like to see.

Cook went on to say the following about China on the call:

In relation to China specifically, I would not put China in that category. Our business in China was very strong last quarter. We grew 16%, which we’re very happy with. iP،ne in particular was very strong, very strong double-di، growth there. Our other ،ucts category was also stronger, in fact, a bit stronger than even the overall company number.

A few months later, in January 2019, Cook shared a letter to investors indicating that Apple’s revenue for the fourth quarter of 2018 would be around $84 billion, lower than its original guidance of between $89 billion and $93 billion in the quarter. Apple indeed ended up reporting revenue of $84.3 billion in the quarter.

Apple’s share price dropped around 25% between November 1, 2018 and January 31, 2019.

In his letter, Cook said the Greater China region’s slowing economy was largely to blame for Apple’s revenue s،rtfall in the quarter:

While we anti،ted some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue s،rtfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iP،ne, Mac and iPad.

The letter added that lower-than-anti،ted iP،ne revenue, primarily in Greater China, accounted for the entire revenue s،rtfall:

Lower than anti،ted iP،ne revenue, primarily in Greater China, accounts for all of our revenue s،rtfall to our guidance and for much more than our entire year-over-year revenue decline.

Investors alleged that Cook knew that iP،ne demand was falling in China at the time of the November 2018 earnings call, but failed to disclose it. Apple has denied these allegations and has not admitted to any wrongdoing. Apple only agreed to the proposed settlement to avoid additional costs and time involved with litigation, the filing says.