Whenever I’m made to feel like a chump for mistakenly admiring and trusting a company or prominent individual, I immediately imagine Dave Stohler, the protagonist in Breaking Away, a coming-of-age 70s flick and among my favorite films of all time. Stohler was a working class “townie” who became obsessed with competitive bicycle racing, particularly the Italians, after winning an Italian-made Masi bicycle. Stohler’s illusions about Italy’s competitive cyclists were shattered when he catches up to a team in a race and one of them sticks a tire pump in his spoke, sending him flying.
“Everyone cheats,” a disillusioned Stohler tells his father afterwards. “I just didn’t know it.”
Apple and Toyota, two companies I’ve long admired and thought were the ethical leaders of the technology and automotive industries, have forced me to channel my inner Dave Stohler and wonder whether all companies are fundamentally dishonest, the only distinctions being to what degree and whether they get caught.
I naively believed Apple CEO Tim Cook when he said that “privacy to us is a human right. It’s a civil liberty.” I also thought that Apple only hired the best and the brightest. That, too, was a mistaken perception.
Meanwhile, I romanticized Toyota as being incapable of the dishonesty and sleaze of Volkswagen, Stellantis, GM, and Ford, companies where ethically challenged behaviors are part of their corporate DNAs. I was wrong about that as well.
Allow me to share what prompted my rude awakenings.
Apple recently disclosed that it had agreed to a preliminary $95 million settlement to end a five-year legal battle relating to allegations that its virtual assistant Siri was snooping on the conversations of unknowing users and then Apple sold the captured recordings to third parties. The case is one of several that have been brought against Apple, Google and Amazon that involve allegations of privacy violations by their voice assistants.
The technologies, often referred to by their names — Siri, Alexa and, Google — are supposedly intended to perform simple tasks such as provide weather forecasts or answers to queries. Nearly two years ago, I wrote about my distrust of Alexa and Roomba because of their alleged privacy violations but I never imagined that Apple would engage in the same ethically challenged activities.
In its settlement agreement, Apple said it “continues to deny any and all alleged wrongdoing” and the company’s PR folks admirably didn’t try to spin the settlement when contacted by reporters.
Siri also denies any wrongdoing. When I asked her this morning if she was snooping on me, Siri curtly replied, “No”.
The $95 million settlement is paltry for a company Wall Street values at $3.5 trillion and reported $383 billion in 2023 revenues. The settlement terms are of the sort that give class action attorneys a bad name.
As reported by the Washington Post, users of Apple products who believe Siri was snooping on them without their knowledge can file a claim. To qualify for a share of the settlement payout, an Apple user must have purchased or owned a Siri-enabled iPhone, iPad, HomePod speaker, Mac computer, Apple watch or Apple TV between Sept. 17, 2014, and Dec. 31, 2024.
Claimants must also confirm under oath that they have experienced Siri eavesdropping on their conversations, and that an accidental activation occurred during a “conversation intended to be private.” Given that individuals can only submit claims of accidental recordings for up to five Siri-powered devices, with a maximum payout of $20 per device, I’d be surprised if even one person will file a claim. Apple products are costly, and if someone is fortunate enough to afford them, I doubt they’d want to spend the time and effort to collect a measly $20.
The Post didn’t disclose how much of the Siri settlement will go to the law firm(s) that filed the lawsuit, but it’s a safe bet they will pocket millions of dollars. The settlement must be approved U.S. District Judge Jeffrey S. White, who also teaches at UC Berkeley Law.
Class action law firms shouldn’t be allowed to collect millions on settlements that provide virtually no benefits to the plaintiffs they represented.
It’s reasonable to speculate that Apple’s lawyers deemed the privacy class action lawsuit a petty annoyance, and that the company agreed to settle to make it go away and be done with it. It wouldn’t surprise me if Apple’s lawyers viewed the $95 million settlement as cause for celebration, given that an Apple administrative assistant could make the payment from the petty cash drawer and still have plenty of funds left to cover other miscellaneous costs.
I see things much differently, thanks to my former client Dick Grasso, who was forced out as chairman and CEO of the New York Exchange in 2003 because then New York attorney general Eliot Spitzer thought he was paid too much money. Spitzer expected that Grasso would quickly settle, allowing the Democratic party darling to claim victory as the self-styled “Sheriff of Wall Street” and tout the success in his quest for what was expected to be a run for the presidency.
Grasso, who was hailed as a hero after 9/11 for promptly restoring the operation’s of the New York Stock Exchange, possessed something that New York’s silver spoon born AG knew nothing about: character. Despite hostile media coverage and Spitzer spreading falsehoods, Grasso wouldn’t settle. Over dinner one night I asked Grasso why he wouldn’t cut a deal and just been done with all the media unpleasantness. He replied, “If I gave back even one cent that would be an admission I did something wrong.”
Grasso, a self-made businessman from a working-class family who grew up thinking he’d become a cop or fireman, added: “I started with nothing, and I’m prepared to lose everything” rather than settle and have anyone perceive he did something wrong.”
Grasso remained true to his word and never returned a penny. Spitzer went on to become governor and his successor eventually dropped the bullshit case against Grasso.
Apple is far deeper pocketed than Grasso was. The company in the past five years has earmarked more than $400 billion (yes, billion) on stock buybacks, a legalized form of stock manipulation that allows CEOs to boost the prices of their company’s shares and enhance the value of their stock options, a major component of their compensations.
Apple’s coffers are so swollen with cash Cook doesn’t know what to do with all the money. If Apple truly believed that it didn’t knowingly violate the privacy of its customers, it had the financial wherewithal to keep fighting and signal to class action attorneys that when it comes to defending the company’s honor, Apple would grind them down them down with years of costly litigation before it would settle and implicitly admit even limited wrongdoing.
As for Apple only employing the best and the brightest, Bloomberg recently reported that Apple has a slew of H-1B visa employees, workers the company hires mostly from India who gladly accept lower wages for an opportunity to work in the U.S. The H-1B visa program was intended to attract extraordinary individuals from foreign countries who would perform tasks that U.S. workers couldn’t do.
According to Bloomberg, only about 60% of the visa holders Apple has sponsored since 2020 had a master’s degree or higher. Apple, like other technology companies, is using H-1B visas to hire employees for lower-level functions.
Reflecting on Apple, I imagined that if founder and visionary Steve Jobs, who died more than a decade ago, came back to life he’d be aghast how little new product innovation Apple has accomplished under Cook. Except for the Apple watch, Apple’s products are mostly refinements of products Jobs spearheaded.
I’m certain if Jobs had $400 billion to spend on research and innovation, Apple would be worth considerably more than $3.5 trillion. That said, Jobs knew a thing or two about manipulating the value of his stock options.
Meanwhile, Hino Motors Ltd., a subsidiary of Toyota Motor Corp., has agreed to plead guilty and pay more than $1.6 billion after federal prosecutors filed criminal charges accusing the automaker of defrauding the United States and violating the Clean Air Act by importing and selling more than 105,000 heavy-duty diesel engines that violate emissions standards, and reaping approximately $1.1 billion.
The settlement eclipses the $800 million Fiat Chrysler Automobiles paid to settle diesel emissions fraud claims but is considerably less than the $14.7 billion Volkswagen AG paid to make amends for its global diesel emissions scandal. I’m not sure of the details of the various emissions scandals but suffice to say I’m surprised and disappointed to learn that Toyota engaged in systemic dishonesty.
As reported by the Detroit News, prosecutors alleged that beginning in 2009 Hino had limited resources and was under pressure to obtain certificates of conformity from the Environmental Protection Agency. Hino responded by using illegal short-cuts, falsifying and altering data, skipping required testing, and concealing and omitting facts from U.S. federal and state regulators, prosecutors alleged.
Some employees made up or altered rest results, a process referred to by engineers as “licking the pencil.” Prosecutors said a senior vice president was aware of wrongdoing.
To Toyota’s credit, the company said it voluntarily disclosed information about the violations to U.S. authorities in 2019. Toyota said the issues didn’t impact the performance or safety of Hino’s vehicles.
Toyota’s wrongdoing pales to GM’s ignition scandal where the automaker knowingly sold Chevrolet Cobalts and Saturn Ions with faulty ignition switches that could inadvertently shut off car engines and airbags, a problem linked to at least 97 deaths and forced the recall of 2.6 million vehicles. It also pales against GM’s driverless Cruise subsidiary providing a false record to National Highway Traffic Safety Administration (NHTSA) “with the intent to impede, obstruct, or influence the investigation of a crash involving one of Cruise’s autonomous vehicles.”
Toyota at least expressed remorse for its wrongdoing.
“We take this resolution seriously and will ensure that the field fix, the Environmental Mitigation Program, and further strengthening of our compliance system, which have been agreed as part of the resolutions, are implemented,” said Satoshi Ogiso, president and CEO of Hino Motors. “We commit to moving forward as a company that can be of service to society.”
In response to the FTC giving GM a pass for privacy violations that have sparked a damning lawsuit by Texas AG Ken Paxton and at least a dozen class action lawsuits, GM insisted, “Respecting our customers’ privacy and earning their trust is deeply important to us,” and that it ended its program of tracking the driving habits of unknowing customers because of “customer feedback.”
In fact, GM stopped its customer tracking program after the New York Times exposed the practice.