PALO ALTO (KPIX 5) -- Apple and CEO Tim Cook knew iPhone sales were in trouble but kept it from investors, according to a new lawsuit accusing the company of securities fraud.
The lawsuit, filed by the City of Roseville Employees' Retirement Fund, estimates that hundreds of thousands of investors suffered economic loss and is seeking class action status.
"This is new territory for Apple," said President and CEO of Joint Venture Silicon Valley Russ Hancock. "Apple has been this company that just could do not wrong; everything they touched turned to gold." But the lawsuit paints a different story.
Court documents allege that Apple told investors the U.S. trade war with China late last year did not have any affect on iPhone sales in that country when, in fact, it did. The lawsuit also claims the company failed to tell investors that iPhone sales were taking a hit because of customers who were replacing batteries instead of buying new iPhones.
The company admitted earlier last year that it was throttling performance to prevent old iPhones from shutting down and offered customers a discount on battery replacements.
After allegedly downplaying the slump in sales, the company then announced earlier this year that it was expected to lose $9 billion in revenue in the first quarter because of poor iPhone sales, particularly in China.
The lawsuit claims that hundreds of thousands of investors who bought Apple common stock between November 2, 2018 and January 2, 2019 were victims of securities fraud.
"In other words, these are fraudulent claims and on the basis of those claims, they made investments and so they feel entitled to some compensation," said Hancock.
He said the impact of the lawsuit could also spread to consumers.
"Your basic Apple consumer is going to wonder, 'Is this a company I can trust? Is this a company that I should invest in with my consumer dollars?'" said Hancock.
But despite the bumpy road that the company has had in the last year and a half, some consumers said they still believe in Apple and the company name.
"The idea of securities fraud is ridiculous," said one Apple consumer who did not want to release his name. "I've got all Apple, it's a phenomenal company, it's changed the world and their products are the absolute best."
KPIX reached out to Apple late Tuesday and is still waiting for a response.
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