Apple Supplier Arrested for Leaking Info

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Apple Sieve Repaired -- A Bit
An Apple supplier was arrested as part of a U.S. probe into insider trading on Wall Street, according to an indictment that was unsealed Thursday. The arrest took place in October of 2009, and was part of a larger sweep into the practices of the investing community to gain insider information on companies, including Apple.

Fortune reported that Walter Shimoon, a director for manufacturer Flextronics (The Wall Street Journal reported that he has since been fired), sold information to a hedge fund that included the number of iPhones sold more than two weeks before that information was released publicly by Apple.

The FBI recorded the conversation between Mr. Shimoon and an employee at the hedge fund who is now cooperating with authorities, and in that conversation he also revealed information about both the upcoming iPhone 4 and the iPad, products that wouldn’t be announced until 2010.

According to the indictment, Mr. Shimoon told his hedge fund contact that Apple was “coming out next year [with a new iPhone model 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.”

That’s a clear description of the iPhone 4 which was announced in June of 2010.

He also described a device for, “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.”

He further said that he knew the codename for the product, “K48. That’s the internal name,” he said. “So, you can get, at Apple you can get fired for saying K48.”

The iPad wasn’t announced by Apple until January of 2010 and released in April, though it was the subject of much advanced speculation and new leaks.

For this and other advanced information, The Wall Street Journal reported that Mr. Shimoon was paid some US$22,000 by the hedge fund between January of 2008 and June of 2010. He was fired by Flextronics in November of 2010, though he was arrested by the FBI on October 1st, 2009.

The Journal also reported that Mr. Shimoon was just one of many so-called “experts” that were part of “expert networks” that were pimped out to hedge funds and other institutions for what the U.S. alleges is inside information. These experts work for suppliers like Flextronics, but also work directly for companies like AMD and Dell, and many others.

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2 Comments

Lee Dronick

Great graphic of the iSieve

ibuck

Do you think $22,000 will cover his legal fees? Or loss of income?

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