Stupid legal question, could this end up becoming a defamation lawsuit?
Regular readers know that a major theme of this newsletter is Everything Is Securities Fraud, so in that vein, let us consider a hypothetical. What if:
1. Everything in the Businessweek story is true, Chinese spies planted hardware backdoors in computers built and used by major American companies, and the FBI investigated along with those companies and discovered the backdoors.
2. It is a national-security secret and the companies were instructed by the FBI never to acknowledge it.
3. The companies are patriotically but falsely denying the hack.
If that is true—and I have no particular reason to think it is, it’s just the sort of hypothetical we like around here—then, obvious question: Is it securities fraud? (Assuming that the hack is potentially material to the companies’ business?) I do not think that the securities laws explicitly allow companies to make false statements of material fact if required for national security, but you could see giving them a pass here.
https://www.bloomberg.com/view/articles/2018-10-04/computer-...
Probably hard for Apple to prove they have lost money because of the story and it would need to be enough to warrant the time and hassle of a court case. Not to mention they would probably rather avoid having the issue mentioned even more often by dragging it through court for a year or two.
When I've been sued or threatened with defamation lawsuits, the first thing we go over is how we're going to show we did due diligence, how we came to the conclusions, how we reached out for comment and incorporated that comment into the process.
If Apple and Amazon can figure out the sources, there's also potential for them to sue the background sources, though that's usually tough and messy (because then you have to prove they not only defamed you, but also that they were the ones who were the original source so doesn't happen much).