Flextronics VP sued for leaking iPhone 4, iPad details

Flextronics VP sued for leaking iPhone 4, iPad details

Summary: During a conversation (taped by the FBI) a Flextronics director allegedly leaked confidential third quarter iPhone sales figures. He also leaked details about the iPhone 4's dual cameras and the camera-less iPad -- and Cupertino wants blood.

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WSJ reports that federal prosecutors have charged four corporate managers in a sweeping insider-trading investigation.

They're accused of accepting cash for insider financial details about Apple Inc. and some key specs of the iPhone 4 and iPad, before their release.

At the center of the charges made public Thursday are four corporate managers who worked on the side as consultants for Primary Global Research LLC, a Mountain View, Calif., "expert-network" firm. Charges also were filed against an employee of Primary Global.

The consultants were allegedly paid more than $400,000.

According to the criminal complaint, former senior director of business development at Flextronics Walter Shimoon leaked the information by phone to an employee of a hedge fund. Flextronics is a major Apple partner that supplies it with camera and battery components.

During a conversation (which was taped by the FBI) Shimoon allegedly leaked confidential (and unreleased) third quarter iPhone sales figures. Armed with such information a savvy investor could use it to profit in the stock market and arguably move the stock.

Philip Elmer-DeWitt notes the two bombshells in the fed's case:

  • Apple, he is heard telling CW-2, was "coming out next year" with a new iPhone that's "gonna have two cameras ... It'll be a neat phone because it's gonna have a five-megapixel auto-focus camera and it will have a VGA forward-facing videoconferencing camera." Apple announced the iPhone 4 -- with its two cameras -- eight months later.

  • Then he is heard telling CW-2 that "they [Apple] have a code name for something new ... It's ... It's totally ... It's a new category altogether... It doesn't have a camera, what I figured out. So I speculated that it's probably a reader. ... Something like that. Um, let me tell you, it's a very secretive program ... It's called K, K48. That's the internal name. So, you can get, at Apple you can get fired for saying K48." The iPad -- code named K48 -- was unveiled four months later.

Prosecutors accused Mr. Shimoon of providing "highly confidential" sales forecasts and product features for the iPhone 4 in exchange for more than $22,000 in "consulting fees" according to prosecutors.

All four were arrested Thursday on wire fraud and securities fraud charges. Elmer-DeWitt reports that fifth person -- a former Dell employee -- pleaded guilty last week and is said to be cooperating with investigators.

Manhattan U.S. Attorney Preet Bharara called the defendants "a corrupt network of insiders... who sold out their employers by stealing and then peddling their valuable inside information."

More Leakgate coverage on ZDNet coverage on:

Speaking of leaks, let's not forget Apple's latest, as reported by our own Rachel King (via DigiTimes):

According to DigiTimes, “Apple plans to launch at least four upgraded MacBook Pros as well as an iMac that features a new panel size and a price point for the mainstream market.” Specifically, the MacBook Pro should also be getting a “slight change in chassis design,” and the Lion version of Mac OS X, which is inevitable and points towards a summer time release.

With a probable mid-year launch date, that would place the MacBook Pro updates over a year after the last upgrade from this past spring, and the current iMac would only be one year old since that desktop also got revamped during the summer.

Pic: Fortune, Apple 2.0

Topics: iPad, Apple, Hardware, iPhone, Mobility

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4 comments
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  • These guys aren't being sued, yet, but they're in bigger trouble.

    They're being prosecuted. [b]Big difference![/b] When you're being sued you get "served", when you're being prosecuted you get arrested!

    It sounds like DoJ has these guys cold (surely the Dell person rolled-ever and wore a wire), so Apple will just let the thing go to trial, subpeona all the resulting evidence, and then bring action against everyone involved who signed an NDA. Flextronics is in big trouble.
    matthew_maurice
    • A further clarification..

      @matthew_maurice

      They're not being "sued" for "leaking." They're being prosecuted for passing along insider information.
      msalzberg
    • RE: Flextronics VP sued for leaking iPhone 4, iPad

      @matthew_maurice

      I was going to post the same thing. The headline writer must be a mental midget. I'm going to assume Jason knows the difference and will get the headline corrected.
      Marcos El Malo
  • RE: Flextronics VP sued for leaking iPhone 4, iPad

    Good.
    james347