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Would you write a billion-dollar check?
August 28, 2012 1:22 PM   Subscribe

So Samsung has been ordered to pay Apple ONE BILLION DOLLARS. Let's assume this is final, and ignores appeal, etc. How would this actually happen? I can't see it being a big check delivered on stage. Bank transfer? Scheduled payments over the course of XX years? (Freightcars loaded with pennies delivered in spite?)
posted by turbogeezer to Work & Money (15 answers total) 6 users marked this as a favorite
 
Electronic transfer, in all likelihood, but it could very well be a physical check.

Regardless, the logistics would be something the companies' lawyers and finance departments would work it out with their respective banks. Companies like Apple may have billions "in cash" but it's rarely actually in cash, it's simply in easily-accessible, highly-liquid accounts. It may well take days or even weeks for a company to be able to issue a single payment of that size.
posted by valkyryn at 1:26 PM on August 28, 2012


I doubt Samsung would issue a check. A physical check can be copied and used for publicity purposes, will be framed on a wall, etc. Likely a transfer within the same large bank.
posted by JohnnyGunn at 1:29 PM on August 28, 2012 [1 favorite]


Generally speaking, one company's internal treasurer would contact the other company's internal treasurer and arrange payment details. Then the first company would arrange for its portfolio of liquid securities (commercial paper, etc.) to be liquidated such that the payment to the second party could clear.

It's really not all that different from payments between two people, except the dollar amounts are higher.
posted by dfriedman at 1:32 PM on August 28, 2012


It would assuredly be wired between institutions, and in one payment, in all likelihood. I've been a lawyer on big billion-dollar-plus deals, and the actual payment of consideration is a bit of a letdown--you just get a call from your banker confirming that you've received (or paid) the money, and that's it.

I did have one deal where I carried a $14 million check across town, which was kind of awesome, but it's far, far more common to have wires.
posted by Admiral Haddock at 1:49 PM on August 28, 2012 [14 favorites]


It absolutely could be in the form of a cheque. One of the values of a cheque is that it doesn't get lost in an electronic netherworld for hours or days if someone keys in a number incorrectly.
posted by Dasein at 1:57 PM on August 28, 2012


Apple is actually a major customer of Samsung's - I think well over $1B/year worth. I wouldn't be surprised if they just handled it as a discount off of Apple's bill at Samsung.
posted by kickingtheground at 2:00 PM on August 28, 2012 [1 favorite]


Apple would give Samsung its wire transfer settlement instructions, which Samsung's bank will use to make the wire transfer. Probably through Fedwire and/or CHIPS.
posted by mullacc at 2:01 PM on August 28, 2012


Dasein: "It absolutely could be in the form of a cheque. One of the values of a cheque is that it doesn't get lost in an electronic netherworld for hours or days if someone keys in a number incorrectly."

I have been involved in high 8 figure wires, and there is no lost in electronic netherworld or mis=keying. There are usually small teams of folks from each firm and the banks on the line confirming numbers and then within a minute or so that the wire came in. All sides confirm instantly.
posted by JohnnyGunn at 2:02 PM on August 28, 2012 [8 favorites]


It depends on the tech-comfort a given entity has. At my job, we deal with some freakishly backward trends, so I've seen checks in the single-digit millions be ferried across town (they're rare enough that it usually involves a person making a delivery.) But Samsung and Apple live in the last quarter of the 20th century, or rather well beyond (*), so it'll almost assuredly be an electronic transfer.

I'd also seriously doubt it'd happen instantaneously or be exactly $1,000,000,000.00. There are usually so many details that you end out doing something like "we give you $739,054,391.06 on August 31st, and then $149,011,142.09 on September 15th, and the remainder, to be negotiated between our legal department and yours, to include random fees and surcharges and crap, no later than December 15th."

I have, in fact, yet to see an invoice, payment voucher, or pretty much any other working financial instrument between two big entities with more than three zeroes in a row (excluding things that are put on giant checks and handed over in a big ceremony, and those are almost always donations or prizes.) I'd definitely want to frame it if I did get my hands on one.

((*) We were typing out cancellations and other documents using typewriters and duplicating paper as a matter of "we actually have to do this in this exact way" as late as the fourth quarter of 2009, and we still have the typewriters and several accountants and fiscal clerks use them daily. I use a mainframe system built in the 1960s as part of my daily work, though I access it using a Windows Vista machine. And so on.)
posted by SMPA at 2:06 PM on August 28, 2012 [1 favorite]


I have been involved in high 8 figure wires, and there is no lost in electronic netherworld or mis=keying

Yes, I can 100% agree. The risk of miskeying is so vanishingly small as to be zero. The risk (and delay) of a paper check is infinitely higher.

It is possible that the payment would be broken into separate wires, but I'd expect that would just be to source the payment from different payors (i.e., Samsung subs), not to pay on an installment basis (though Apple might be be a really swell pal and let Samsung pay in installments on the basis of a, say, 10% interest rate).

Agreed that the $1B will not be $1B on the dot; I haven't read any details on the verdict, but I assume there will be an interest component. I doubt that Apple would agree to take the payment as an offset against future invoices to Samsung.
posted by Admiral Haddock at 2:19 PM on August 28, 2012


Apple is actually a major customer of Samsung's - I think well over $1B/year worth. I wouldn't be surprised if they just handled it as a discount off of Apple's bill at Samsung.

This almost certainly would not happen, as it would be bound to be tax-advantageous for one party or the other (or both, in which case the IRS wouldn't permit it).
posted by The Bellman at 2:23 PM on August 28, 2012


Just my two cents, but in my experience, checks that size (and even bigger!) definitely do get passed around. See: http://i.imgur.com/RVOG9.jpg
posted by un petit cadeau at 2:38 PM on August 28, 2012 [5 favorites]


Co-mingling a legal settlement with inventory accounts would absolutely never be allowed to happen except in the smallest of firms. SOX nightmare. Having dealt with tax settlements, I have seen a preference for physical checks. It's something that everyone can document easily so that any error can be traced back if it should happen.

The extra exposure doesn't just mean more opportunities for theft/delay, it also means more eyes watching to make sure it gets done correctly.

Given the overseas aspect, I wouldn't be surprised if the money is in escrow to be released to Apple pending appeal (which will most likely be attempted).
posted by politikitty at 3:41 PM on August 28, 2012


Or they could choose to be assholes about it and deliver it in coins
posted by jacalata at 11:36 PM on August 28, 2012 [1 favorite]


I wouldn't be surprised if the money is in escrow to be released to Apple pending appeal

Actually, Fed. R. App. P. 62(d) deals with what's called a "supersedas bond," where the party appealing the judgment puts up a bond for the value of the judgment to permit the appeal to go forward. This is why appeals are so expensive. You don't just have to pay your legal fees, you have to basically satisfy the judgment before you can even take the first step.

What's going to make this even more complicated is that Samsung might not even be the one paying. There can be insurance for this sort of stuff. So we might be seeing what is only the first step in a chain of litigation. Samsung could be tied up with its insurers (and reinsurers) long after this lawsuit and its appeal are over.
posted by valkyryn at 12:41 PM on August 29, 2012


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