Apple's stock surge makes its secrets a big target

Apple's stock surge makes its secrets a big target

Summary: A massive insider trading probe focused on expert networks illustrates just how valuable Apple's secrets---product roadmaps, new features and forecasts---have become.

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A massive insider trading probe focused on expert networks illustrates just how valuable Apple's secrets---product roadmaps, new features and forecasts---have become.

On Thursday, the Feds arrested four people in an insider trading probe. According to the FBI, the U.S. government alleges that James Fleishman, an executive at Primary Global Research, used four consultants employed by public companies to deliver confidential information. The companies were AMD, Flextronics, Dell and TSMC. (the FBI complaint)The Holy Grail for traders looking to game the system, however, were details about Apple's plans via Flextronics, a contract equipment manufacturer. A Flextronics employee, Walter Shimoon, had the goods on Apple trade secrets through a contract manufacturing relationship. Flextronics supplied camera modules to Apple.

The AP says a government complaint details how Primary Global Research clients were told about Apple's trade secrets including sales forecasts, new iPhone features and a project known as K48, which became the iPad.

According to the complaint read by ZDNet, Shimoon knew:

  • A new iPhone "is gonna have two cameras."
  • The iPad first generation didn't have a camera, but was in "a new category altogether."
  • Knew the code name for the iPad as K48 and then noted that "at Apple you can get fired for saying K48." Of course that didn't stop Shimoon from yapping.
  • And sales projections for the iPhone and iPod.

It's no surprise that Apple secrets were so highly coveted. Check out the two-year chart:

An FBI statement notes that Shimoon, a Flextronics employee, spilled the details about Apple's products to Primary Global. Here's what the FBI had to say:

As part of this business relationship, Flextronics and certain Flextronics employees were provided with information and forecasts regarding Apple purchase or shipping orders regarding certain Flextronics components, as well as information regarding alternative suppliers for Apple products. The confidentiality of this kind of information was governed by non-disclosure agreements executed between Flextronics and Apple. In addition, Apple often shared information with Flextronics about future Apple products under development. The confidentiality of this information was governed by a separate non-disclosure agreement executed between Flextronics and Apple. For example, in or about 2009, Apple informed Flextronics about a highly secretive project being developed that ultimately resulted in the public product launch of the "iPad" tablet computer.

Shimoon had a confidentiality agreement in place, but had a series of calls with Primary Global Research between January 2008 and June 2008 detailing the upcoming iPhone and sales forecasts. The real rub is that Shimoon only got paid $22,000 in consulting fees.

Topics: Outsourcing, Apple, Banking, CXO, Data Management, Enterprise Software, Government, Government US, Software

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13 comments
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  • so what. according to Hollywooddog

    there should be NO SECRETS! James Fleishman is a HERO. trying to force out competitors from the market leaves people unemployed and homeless. this information should be made public because it will allow companies a chance to compete and keep people working and affording homes.
    Ron Bergundy
    • RE: Apple's stock surge makes its secrets a big target

      @cyberspammer2 The information was used by stock traders for their clients who are filthy rich to get richer. No one got to afford homes because of these secrets. And insider trading is illegal for that very reason. That's why Martha Stuart went to jail. It's like being able to know what the winning numbers are in the lottery. You scam the system and have an unfair advantage over other stock holders. The stock holders who know about the timing of the iPad can buy a load of stock just before the announcement and make a ton of money.
      travisgamedev
      • RE: Apple's stock surge makes its secrets a big target

        @travisgamedev I think cyberspammer2 was using the sarcasm font. At least I hope he was. Otherwise he's clueless. As for your comment about the information being used by the 'filthy rich getting richer', can we say 'class warfare'? Most of the 'investors' in the stock market represent average people's money that they have invested in IRAs, mutual funds, retirement funds, et al. And the SEC watches the correlation between massive stock sell/buys and product development, hence, M. Stewart's difficulties.
        dheady@...
      • RE: Apple's stock surge makes its secrets a big target

        @dheady

        "most investors represent average people's money"... I agree with most of your post, except the bit about average people having most of the investments. It's a known fact (one easily verified with a few searches) that the top 5% of Americans own the vast majority (90%+) of resources. Also, the "average" American only has about $35,000 in savings and retirement investments by the time they retire. This fact came to light just about a week ago. So... sorry but your assessment of how the investment market is divided into the various income levels is simply a pile of nonsense.
        rock06r
    • RE: Apple's stock surge makes its secrets a big target

      @cyberspammer2
      So, according to you, James Fleishman = hero for spilling CONFIDENTIAL information about Apples products.

      Julian Assange = class 3 terrorist that needs to be shot for spilling confidential information about the government.

      Makes sense.
      Myoga-
    • RE: Apple's stock surge makes its secrets a big target

      @cyberspammer2 Oh god, how can you be so ignorant?
      nicholas22
    • RE: Apple's stock surge makes its secrets a big target

      @cyberspammer2

      There should be no secrets .....R U kidding me??? What dream world are you living in?
      fatherleeds
      • RE: Apple's stock surge makes its secrets a big target

        @fatherleeds

        Apparently you aren't real good at spotting sarcasm.
        Hallowed are the Ori
    • Explain to me how...

      @cyberspammer2 : ... keeping an industrial secret is "forcing out competitors"? Industrial trade secrets are as old as industry itself, even automotive companies going out of their way to disguise new model designs until they are completed and ready for sale.<br><br>Sorry, dude. Competition means coming up with new concepts that the other guy doesn't have. There is no law that forces companies to tell all their competitors what they're doing.
      Vulpinemac
  • RE: Apple's stock surge makes its secrets a big target

    Why would they fire someone if he/she used the code name internally?<br>The automotive industry uses code names for their future products, and all they use internally, as well as with their suppliers, is the code name for the products (for example 2009 Z433, or simply Z433)!<br>It doesn't make sense to me that a code name is not to be used.<br><br>OK, a question to the lawyers (only), please:<br><br>In this case, assuming all allegations above are true, who goes to jail?<br>Is it James No-Leash-Man, Walter Shame-On, James' clients who bought shares after their knowledge of the insider information, or all of the above?<br><br>I hope Larry will keep an eye on the future developments of this story.
    sh10453
  • RE: Apple's stock surge makes its secrets a big target

    Awesome.
    james347
  • Secret, Schmecret; the Brass &amp; Board know EVERYTHING

    Funny how Uncle Sam attacks p-ons who?ll never make enough to affect the market on any tips they get, but at the same time shields the Big Wigs who insider trade regularly?that?s why the reports are called ?Insider Trading?. Hell the government allows the corporations to just give away stock to the elites. As far as Back Dating, you don?t have to know when the stock is at the bottom to buy, the corporations do it for you?in Apple?s they purchase for you twice a year; you get the LOWEST price minus a percentage in 6 month blocks. There is no free market capitalism, only Protected Market Croneyism.
    iPhoned
  • RE: Apple's stock surge makes its secrets a big target

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