Intel Says CEO Dumping Tons of Stock Last Year 'Unrelated' To Big Security Exploit (gizmodo.com)

An anonymous reader shares a report: Late last year, the CEO of Intel sold millions of dollars in company stock, as CEOs often do. The sale appears to have occurred while developers were reportedly rushing to fix a major security flaw affecting Intel processors made in the last decade. According to a report published by the Register this week, "a fundamental design flaw in Intel's processor chips has forced a significant redesign of the Linux and Windows kernels to defang the chip-level security bug." Windows and Linux developers have reportedly been working to address the issue since November. As our friends at Gizmodo ES pointed out, Intel's CEO Brian Krzanich sold roughly $11 million in company stock at the end of November. Counting the employee stock options Krzanich exercised, the CEO unloaded 245,743 shares, leaving him with 250,000 remaining shares -- the minimum Krzanich is required to own according to the company's bylaws, the Motley Fool reported. To be clear, this isn't proof of some insider-trading conspiracy. Contacted by Gizmodo, an Intel spokesperson called the sale "unrelated," and said it "was made pursuant to a pre-arranged stock sale plan (10b5-1) with an automated sale schedule."

Comments

Good enough for Equifax, good enough for Intel

[OffTheLip]

Krzanich had a tested stock dump plan to follow.

Re:Good enough for Equifax, good enough for Intel

[SlaveToTheGrind]

It doesn't hold a candle to your shoot-from-the-hip incendiary comment plan. I and others have written repeatedly in detail about why the timing and amount of Equifax's execs' transactions were completely consistent with their past trading patterns and weren't at all consistent with a dump. Did you have some specific facts you wanted to share with the class that support your belief that those transactions were indeed uncharacteristic?

Re: Good enough for Equifax, good enough for Intel

[Anonymous Coward]

To avoid the appearance of impropriety, executives often are required to schedule stock sales months ahead of time. That's what happened here.

Equifax only allows executives to sell stock during certain windows during the year. When those windows open, lots of executives sell, which is why 4 or 5 of them sold around the time of the breach.

Given a big enough company, at least one insider is always selling stock within a few days of bad news. Which makes these kinds of stories flamebait and should be modded -1.

Re: Good enough for Equifax, good enough for Intel

[LordKronos]

To avoid the appearance of impropriety, executives often are required to schedule stock sales months ahead of time. That's what happened here.

Yes, but how many months ahead of time in this particular case? From some of the released information so far, we know that Google contacted Intel about their discovery of this issue on June 1, 2017.

According to the link below (warning...anti-adblock popup), the sales were arranged in October, LONG after Intel was aware of it. Between June and October, it's almost certain information about the magnitude of this vulnerability and the impact of fixing it had made it all the way up to to the CEO.
http://www.businessinsider.com...

Re: Good enough for Equifax, good enough for Intel

[sheph]

That's exactly what I was thinking. Usually stuff like this doesn't become public until many meetings are held determining how to manage the PR nightmare. I'll bet they've known about this for at least a year, maybe two.

Re: Good enough for Equifax, good enough for Intel

[LordKronos]

I don't know. That chart you linked was pretty telling. He used to hold 300k shares. Then his typical average went to 350k shares, drifted up to 400k, then drifted up to 500k shares. There was some fluctuation, but over time he was generally increasing his holdings pretty reliable. Then bam!!! End of November comes and he sold every last share that he was allowed to sell (Intel rules say the CEO musk own 250k shares, and he sold down to exactly 250k).

One odd thing about that chart. The numbers on that chart dont exactly add up between consecutive transactions (previous total +/- shares traded should equal new total), but they are at least reasonable close. But then the 2nd to last line we see he has a balance of around 500k shares (which is consistent with the trend), but that the last line where he ends up with exactly 250k shares left, but it says he traded almost 900k shares to get to that point. Not sure what that discrepancy is about.

This may be technically true.

[ChodaBoyUSA]

The sale did occur after the security flaws (remember, there have been several) were reported. He may actually get away with this.

Re:This may be technically true.

[K. S. Kyosuke]

And maybe all he had to do was not to cancel a pending sale.

Re:This may be technically true.

[kiviQr]

You can do better, setup a sale every 3 months just in case. If "in case" does not happen cancel transaction and wait for next window. If "in case" happens you are covered.

Re:This may be technically true.

[ranton]

The sale did occur after the security flaws (remember, there have been several) were reported. He may actually get away with this.

Get away with what? The stock went up after his sale, and it still at the same price now that it was in late November. You have to personally gain from insider trading to be convicted, and if he would have waiting until the exploit was made public he would have actually made more money.

This is a non story.

Re: This may be technically true.

[kenh]

But if you're the CEO of a mom and pop shop, you might slip by without scrutiny.

And of course, by "mom and pop" you mean a publicly-traded mom and pop, right?

"Captain..."

[MitchDev]

"...sensors are indicating bullshit levels completely off the scale..."

"Shyeah..."

[Guyle]

"... and monkeys might fly out of my butt." -Wayne Campbell

It's not a crime

[rsilvergun]

if the law isn't enforced.

Re:It's not a crime

[nucrash]

Just donate to the right candidates and you will never have any legal problems.

Re:It's not a crime

[Anonymous Coward]

It's not a crime if the law isn't enforced.

Or more on topic, it's not a crime if there is no law against it.

The SEC goes by when the automatic schedule was issued, not when it executes.
So it doesn't really matter if that trade executed after the flaw was known, what matters if the schedule was put in before or after the flaw was known.

Now granted we only have "an Intel spokesperson" to go by here, but if that statement isn't a lie then you would need to prove Intel was made aware of the flaw in early 2017 when the schedule was set up.

Re:It's not a crime

[ranton]

It's not a crime because it's not a crime. If he would have waited until after the story broke he would have made more money of the sale of his stock, because the price is still higher than it was on Nov 29th. You need to personally gain to be accused of insider trading.

Re:It's not a crime

[smooth wombat]

You need to personally gain to be accused of insider trading.

That isn't entirely correct. One can do insider trading to prevent a loss as well as get a gain. The definition from the SEC:

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

The next paragraph relates to the current issue:

Examples of insider trading cases that have been brought by the SEC are cases against:

Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

Government employees who learned of such information because of their employment by the government; and

Other persons who misappropriated, and took advantage of, confidential information from their employers

The link from the SEC

Re:It's not a crime

[rtb61]

It was lower because they were selling stock, when CEO start dumping stock, yeah buddy, it certainly does not improve stock prices. Not to forget mister mutton brain, if they sold it for a profit then they made money, they just made less money if they would have waited and found out the bug has less of a fiscal impact. So yeah, really, really, really, looks like insider trading and failure to prosecuted would really, really, really look like rampant corruption. Oh so public, it's going to be really, really, really hard to slime out of this one. About the only way, prove they were unaware of the problem.

Good Business Move?

[GregMmm]

I'm no BK fan, as I used to work for the company, but I think this is just bad timing. I would have sold about the same time also. The stock is the highest it's been since the .com bubble burst. Intel stock has been an ok dividend stock for many years now, but relatively flat.

Bad optics, but not likely illegal.

[CraigCruden]

The sale was more than likely schedule well in advance of that date - which would be before the defect was reported. As such he is not trading on insider information since he was not relying on any insider information. It doesn't necessary look good, and if he were interested in the optics of it -- he could have cancelled it... but it was not a requirement. The majority of his assets are likely Intel stock by the fact he gets paid in it - and financially it makes sense to diversify - especially with the renewed competition with AMD.

So lucky, bad optics, but nothing illegal.

Also, The stock price is actually at or above the price that it was in November...

Re:Bad optics, but not likely illegal.

[Ecuador]

I'd be interested to know if he schedules a sale every year and usually cancels ;)
I mean that's what I would do if I wanted to make my insider trading legal, always have a scheduled sale just in case...

Re:Bad optics, but not likely illegal.

[MachineShedFred]

According to TFA, he sold every share, and exercised every option he could while still retaining exactly the amount of shares necessary to comply with his employment agreement.

Short version: He unloaded everything he could and still remain CEO.

Further questions: when exactly did Intel learn of the problem? When exactly did Mr. Krzanich learn of the problem? When exactly did Mr. Krzanich file the pre-arranged stock sale plan (10b5-1)?

If those all happen in a sequence, he needs to go to fucking jail. By the way, Intel employees are given restricted stock grants as part of their performance reviews - how many employees are getting the shaft on unvested shares while this guy cashes out ahead of bad news?

Re:Bad optics, but not likely illegal.

[Anonymous Coward]

According to Business Insider: Link

Intel knew back in June. The stock sale was planned in October and actually executed in November.

Re:Bad optics, but not likely illegal.

[hcs_$reboot]

According to Project Zero, Intel was notified of these exploits in June.

Intel could have been aware of the problem early on, and decided to ignore it until it's revealed from outside.

Re:Bad optics, but not likely illegal.

[tlhIngan]

According to TFA, he sold every share, and exercised every option he could while still retaining exactly the amount of shares necessary to comply with his employment agreement.

Short version: He unloaded everything he could and still remain CEO.

Further questions: when exactly did Intel learn of the problem? When exactly did Mr. Krzanich learn of the problem? When exactly did Mr. Krzanich file the pre-arranged stock sale plan (10b5-1)?

If those all happen in a sequence, he needs to go to fucking jail. By the way, Intel employees are given restricted stock grants as part of their performance reviews - how many employees are getting the shaft on unvested shares while this guy cashes out ahead of bad news?

Uh, if you were paid partially in stock, you'd cash out too. And executives cannot sell stock acquired this way at any time they wish. They have to file plans to sell the stock anywhere from 6 to 12 months or more ahead of time. This is public information, and as an investor, you can read those filings and unload your stock a day before if you wish.

It's completely automated - the sale order was set and barring anything, all you can do is cancel it.

And yes, if you're paid in company stock, regardless if you're a CEO or janitor, it is sound investment strategy to sell all your stock compensation as soon as possible. Sell every share you own that you can, exercise every option you can. Don't be an idiot and hang onto company stock. If you want to invest in your company, sell your shares, then buy them on the open market as part of a diversified portfolio.

Far too many people have gotten burned because they took stock as compensation and never sold it, even when they changed jobs. Then companies go out of business or other thing and now their entire retirement portfolio holds junk. (Yes, some people got retirement savings paid into as stock)

If you're require to hold onto a certain amount of stock, that's all you hold - sell the excess.

It's like being paid in options - they're worthless so make trades to turn them into cash. This is especially true nowadays when the dot-com boom of people becoming instant billionaires is no longer true. Exercise your options (unless they're underwater), take the profit (and use it to pay your capital gains taxes), and if you still want to hold onto the stock, buy it on the open market at market value.

Re:Bad optics, but not likely illegal.

[thegarbz]

Not even Intel's CEO would be stupid enough to hold any more Intel stock than he absolutely had to, especially if that's the way you get paid.

Re:Bad optics, but not likely illegal.

[thegarbz]

Yeah it seems fishy, except that's precisely how most CEOs operate. Shit I'm not even a CEO and I have an automated yearly sale scheduled for my stock options.

It may seem like a good idea for performance of a company to tie company success to people's efforts, but the people in general don't like their money being tied to the performance of others.

Re:Bad optics, but not likely illegal.

[The Cynical Critic]

The sale was scheduled in advance yes, but only in late October when Google informed Intel of their findings in very early June. In other words; The sale was scheduled months after they were informed of the problem.

When you factor in that "little" tidbit, this is about as clear as cases of insider trading get...

Re:Bad optics, but not likely illegal.

[cyn1c77]

The sale was more than likely schedule well in advance of that date - which would be before the defect was reported. As such he is not trading on insider information since he was not relying on any insider information. It doesn't necessary look good, and if he were interested in the optics of it -- he could have cancelled it... but it was not a requirement. The majority of his assets are likely Intel stock by the fact he gets paid in it - and financially it makes sense to diversify - especially with the renewed competition with AMD.

So lucky, bad optics, but nothing illegal.

Also, The stock price is actually at or above the price that it was in November...

What you mean to say is that the stock sale was scheduled in advance, so he just pushed the announcement of the security exploit back by a few months to prevent himself from losing millions.

There's more than one way to skin a cat, eh?

Re:Bad optics, but not likely illegal.

[Actually, I do RTFA]

According to the best information I have:

when exactly did Intel learn of the problem?

June 1st, 2017 (Google's Disclosure)

When exactly did Mr. Krzanich learn of the problem?

Unknown

When exactly did Mr. Krzanich file the pre-arranged stock sale plan (10b5-1)?

October 30th, 2017. (Business Insider)

There are always classes - even in Soviet Union

[CraigCruden]

Even in the Soviet Union there are always classes - you had the ruling class and everyone else typically.

So yes, less people with wealth but far far more poor people that had to line up for hours on end waiting for food.

Maybe you should just move to Venezuela...

Re:Kracznik

[Killall -9 Bash]

Best racist eye test ever.

-1 informative

Re:Someone needs to shoot some CEOs

[Anonymous Coward]

So it's all good because obscenely rich assholes that "vote" themselves onto the board grant obscene salaries and bonus schedules to other obscenely rich assholes, who happen to be board members where the first group of obscenely rich assholes happen to be executives. And they all stay in place because they control more shares as a group than the unorganized masses, with the exception of the indifferent hedge funds that are operated by the same set of obscenely rich assholes.

Gee, I can't imagine where the problem may lay. Who's watching the watchers?

Message to Brian Krzanich

[DontBeAMoran]

We won't be mad if you buy a total of $11 million worth of Ripple, Digibyte, Reddcoin and Dogecoin.

Stock price not moved, computers still computing..

[CraigCruden]

Stock price not moved, computers still computing... computers still susceptible to exploits.... so yes, it could be considered minor.

The only way this could be considered major is if it forced a recall of the chips affected, and for that to happen it has to affect the ability to use. A performance hit because operating systems need to be modified to make the system more secure -- only affects reputation to a little extent. If exploding Samsung phones cannot significantly hurt Samsung going forward; then a bug that will never be noticed by 98% of users... is minor.

Re:Someone needs to shoot some CEOs

[Bing Tsher E]

Considering what they did to eastern europe, I will choose the other side.

Re:Someone needs to shoot some CEOs

[Bing Tsher E]

Who would you suggest will watch the 'new' watchers?

Or do not advocate 'organizing' to plot your little overthrow? When whomever is leading the rebellion consolidates power, same as it ever was.

Re:Someone needs to shoot some CEOs

[Nidi62]

The class war is in full effect. Time you picked a side.

CEOs and their obscene salary and bonus schedules are put in place by board members.

Ah, yes. The board members who themselves are CEOs for other companies and who get paid salaries and get benefits that are comparable to other CEOs. The whole thing is more incestuous than a medieval French court.

Re:Stock price not moved, computers still computin

[Bing Tsher E]

"Force a recall of the chips affected?"

Wowza. I am glad now that I've got that stack of Dell Optiplexes and that pile of '486 laptops in the storeroom.

Re:Stock price not moved, computers still computin

[CraigCruden]

The stock was about $43 a month ago, It is higher than October of last year when the defect was found when insider trading would have started...it is well within the trading range.

Large users of Xeon processors will likely get a deal on replacements and future purchases if they are significantly affected - but we won't be privy to it. BTW it won't be 30% overall, it will be 30% on some workloads -- so some jobs will be 30%, others may be 5%. The defect is not part of any specifications that I know of, Intel does not do those types of specifications - they do things like processor cores, bandwidth, clock rates, PCIe lanes, etc. As such the processor is still as per spec.

What did Intel know

[rsilvergun]

and when did they know it. That's sorta what I want to know. If Intel's known about this bug for, say, 10 years and ignored it so they could outperform AMD then I think that's pretty good grounds for a lawsuit. Especially if it's a 5-30% drop in performance.

Soviet Union - Cuba - Venezuela

[CraigCruden]

My comment was in response to the original poster (you maybe) 'The class war is in full effect. Time you picked a side.'. The Marxist system was created out of basically a class war. At no point did the original post indicate it was socialism -- or for that matter communist.... but the revolution of Marxist type takeovers is more associated with class warfare where you had to 'choose a side'. Socialist countries can be democratic (real -- not just in name) and a democratic system is not about class warfare but about competing ideas and letting the people chose.

The Soviet Union was a Marxist 'Communism' country. Fidel Castro modelled Cuba after Marxist 'Communism' (his words). In many respects Fidel Castro is the ideological father of Venezuela's socialist system -- as such it is not a surprise nor a mistake that Venezuela has consistently moved in that direction. Soviet Union - failed, Cuba - not in great shape and has financial backers to keep it alive, Venezuela ... basically a failed state, North Korea... basically a failed state. China has adopted capital markets and is more a one party rule dictatorship rather than what it was before which was modelled under the Marx doctrine.

Doing the same thing over and over again and expecting a different outcome is a pretty good definition of insanity.

Re: Stock price not moved, computers still computi

[kenh]

Large users of Xeon processors will likely get a deal on replacements and future purchases if they are significantly affected - but we won't be privy to it.

You mean, perhaps, "purchasers" of Xenons? Few large scale users of Xeon processors actually purchase CPUs independent of servers.

How would a discount on future, corrected, CPUs help end-users overcome the performance hit their pre-fix CPUs took?

Re: Not exactly a vote of confidence

[kenh]

He has $11m in Intel's stock right now, before the sale he had $22n in Intel shates. He just works there, the board could boot him at any time, why does his investment portfolio need to be 100% Intel stock?

He executed similar sales at about the same time of year in both 2016 and 2015 - it would have been suspicious of he placed the sale order in early July, because that would have been out of character with previous behaviour.

Re:Someone needs to shoot some CEOs

[HiThere]

Neither.

Don't let the labels fool you, look at how the system works. The US is a complex oligarchy of the fascist sub-type. Russia was a failed attempt at a totalitarian state. I'm not quite sure quite what it is now, most probably a police state. China...well, I'm not sure yet. A decade or so ago it was still an Imperial state with the names changed, including worship of the emperor. These days ... I'm not sure. It may be a successful totalitarian state, or maybe something quite different.