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Apple supplier arrested in insider trading probe over future iPhone details

post #1 of 12
Thread Starter 
An insider trading sweep by federal prosecutors that led to the arrest of five suspects included a senior director for Apple supplier Flextronics, who was arrested on charges that he leaked confidential details about an upcoming iPhone and the unreleased iPad.

The arrests were the result of a three-year investigation that has led to raids on Wall Street hedge funds and mutual funds in recent weeks, The Wall Street Journal reports. According to the report, more arrests are expected in the months ahead.

Walter Shimoon, senior director of business development at Flextronics, allegedly provided "highly confidential" sales forecasts and details for an unreleased iPhone during his time as a consultant for "expert-network" firm Primary Global.

Shimoon may have also leaked information about Apple's highly secretive K48 tablet project, which became the iPad.

According to the Silicon Valley Business Journal, a government complaint filed with Shimoon's arrest included a transcript of a wire tap in which Shimoon allegedly said, "Its a new category altogether. I believe its called K48 ... At Apple, you can get fired for saying K48 ... outside of a meeting that doesnt have K48 people in it. Thats how crazy they are about it."

In a moment of unwitting precognition, he is also alleged to have told a witness cooperating with the investigation, "That would really suck if you recorded all the calls."

Expert-network firms charge a fee to investors for arranging "consulting sessions" between investors and employees of public companies for the purposes of market research, the Journal noted.

In November, the Journal reported that the U.S. Securities Exchange Commission was investigating expert-network firms and Wall Street analysts for possible insider trading.

Flextronics, which has supplied electronics components to Apple for years, issued a statement Thursday acknowledging that Shimoon "has been terminated."

U.S. Attorney Preet Bharara described the case as involving "a corrupt network of insiders at some of the world's leading technology companies " who "sold out their employers by stealing and then peddling their valuable inside information."

"The information trafficked by the four 'consultants' went way beyond permissible market research," said FBI Assistant Director-in-Charge Janice Fedarcyk. "It was insider information." Fedaryck revealed that insider consultants had allegedly been paid over $400,000.

Primary Global vice president and sales manager James Fleishman, who was also arrested Thursday, told one executive cooperating with the government, "whatever you're looking for, whether it is short term or long term, we'll have people."

Other consultants charged in the case include former employees at Dell, AMD and Taiwan Semiconductor Manufacturing Co. They were charged with "wire fraud and conspiracy to commit securities fraud and wire fraud," the Journal reports.

Apple has long been known as one of the most secretive companies in Silicon Valley. According to one marketing veteran, the company's culture of secrecy took shape in 1984 with the release of the original Macintosh.

In July, former Apple employee Justin Maxwell offered a rare glimpse into Apple's security measures.

"It wasn't just the rules, it was the job itself," Maxwell said. "The measures that Apple takes to protect its creative and intellectual environment are unparalleled in the valley, and it's been a disappointing experience since leaving there. Apple's security policy extends to blogs, to speaking engagements, to what we talk about with our spouses. Most people get it and respect it."
post #2 of 12
I never did like the phrase "has been terminated". It makes it sound like they killed him by firing squad.
post #3 of 12
Put them in Pelican Bay.
post #4 of 12
It's interesting that this information had the value of at least $500,000. So, to bring up an old story, how much was the iPhone 4 prototype "worth"? And to whom? And... did the rapid appearance of the antenna demo have anything to do with the theft?
post #5 of 12
This story has absolutely nothing to do with the last para on Apple secrecy, this is an insider trading story, it happens to include Apple.
post #6 of 12
Are they trying to kill rumor sites like AppleInsider, so essential for creating a positive buzz about new Apple products?


I mean, let's face the facts:

1- Apple products are premium price products which, generally speaking, are late to market and follow market leaders who create markets (e.g. the iPod following Sony's Walkman and the iPhone following Nokia and Blackberry's early models);

2- As a rule, Apple products are redesigned products, gift wrapped, but lacking some of the features found on less expensive or equally priced products sold by competitors (e.g. a Blu-Ray drive, an FM radio tuner, a TV out graphic card, a better graphic card to play computer games, etc.);

3- Rumors and speculations fill the void of news coming from Apple Inc.;

4- Excitement for Apple products is created by Apple marketing through clever and distinctive marketing campaigns, but relies also on permanent speculation about the next big thing to come out of Cupertino.

Rumors and speculation are as essential to Apple's success as electricity.


Now, the second aspect to examine, is the absence of revelations in all those leaks. Let me explain: The next iPhone, MacBook, iMac, etc. is going to include the latest CPU, gadget or feature offered by competitors as every electronic manufacturer relies on parts manufactured in Asia by suppliers who offer their products to every electronic manufacturer. Where is the secret?

And most manufacturers announce the features of their upcoming products 6 months to one year in advance. Most new features are demonstrated in trade shows and described in publications up to one year in advance.

Is it a secret that the iPhone 5 will be launched in June 2011 and sport better cameras and, possibly, the best screen?


post #7 of 12
Quote:
Originally Posted by ouragan View Post

Are they trying to kill rumor sites like AppleInsider, so essential for creating a positive buzz about new Apple products?


I mean, let's face the facts:

1- Apple products are premium price products which, generally speaking, are late to market and follow market leaders who create markets (e.g. the iPod following Sony's Walkman and the iPhone following Nokia and Blackberry's early models);

2- As a rule, Apple products are redesigned products, gift wrapped, but lacking some of the features found on less expensive or equally priced products sold by competitors (e.g. a Blu-Ray drive, an FM radio tuner, a TV out graphic card, a better graphic card to play computer games, etc.);

3- Rumors and speculations fill the void of news coming from Apple Inc.;

4- Excitement for Apple products is created by Apple marketing through clever and distinctive marketing campaigns, but relies also on permanent speculation about the next big thing to come out of Cupertino.

Rumors and speculation are as essential to Apple's success as electricity.


Now, the second aspect to examine, is the absence of revelations in all those leaks. Let me explain: The next iPhone, MacBook, iMac, etc. is going to include the latest CPU, gadget or feature offered by competitors as every electronic manufacturer relies on parts manufactured in Asia by suppliers who offer their products to every electronic manufacturer. Where is the secret?

And most manufacturers announce the features of their upcoming products 6 months to one year in advance. Most new features are demonstrated in trade shows and described in publications up to one year in advance.

Is it a secret that the iPhone 5 will be launched in June 2011 and sport better cameras and, possibly, the best screen?



So you are justifying insider trading by wanting rumor web sites? Not sure I see a direct connection here.
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From Apple ][ - to new Mac Pro I've used them all.
Long on AAPL so biased
Google Motto "You're not the customer. You're the product."
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post #8 of 12
At least, an insider-related article in Apple Insider!
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post #9 of 12
I think the only fair thing to do at this point is release all information related to (1) a Verizon iPhone and (2) the next generation iPad. After all, if this guy has been leaking that information, there are a few unauthorized people who know, so why not level the playing field again? Give us the info!!!!
post #10 of 12
Haha - the guy's TripIt information in his LinkedIn profile indicates "Walter has no upcoming trips planned." Indeed.

http://www.linkedin.com/pub/walter-shimoon/1/12/b6a
post #11 of 12
Quote:
Originally Posted by digitalclips View Post

So you are justifying insider trading by wanting rumor web sites? Not sure I see a direct connection here.


What I am saying about the so-called criminal and securities investigations for "insider trading" of individual investors, mutual fund and hedge fund managers is that there is no secret and no possible secret.

CAVEAT EMPTOR is the latin maxim. Buyer beware! is the rule in modern law. Every investor should investigate the companies he wants to invest into. Are there any limits to his investigation? No, except for time.

Some buyers are limited to English, where others read and speak 6 or 7 different languages. Are the multilingual buyers better informed? In most cases, yes. Is it fair and legal? Yes.

Some buyers know employees and former employees of companies, suppliers to companies or custumers of companies with information and opinions about the companies they want to invest into. Is it legal to talk with the employees, former employees, customers and suppliers, some of whom may be family relatives? Yes. Is it fair and legal that some investors don't talk with the same persons? Yes.

Most companies advertise their upcoming products 6 months to one year before the products are manufactured. Is it fair and legal? Yes. In a competitive market (where buyers are not forced to buy from sellers who are not forced to sell) where companies fight to get their customers, companies advertise their upcoming products and their features long before they are available in an effort to capture the attention and imagination of buyers, preventing them from buying from competitors. Is it fair and legal? Yes.

My point is that there is no secret about upcoming products, at least if you are willing to make the effort to investigate companies thoroughly.

"Insider trading" is strictly defined by corporate and securities laws and is not an open ended notion where anyone with information, any information, qualifies as an insider. There are limits to what is regulated as "insider trading".


post #12 of 12
Quote:
Originally Posted by ouragan View Post

What I am saying about the so-called criminal and securities investigations for "insider trading" of individual investors, mutual fund and hedge fund managers is that there is no secret and no possible secret.

CAVEAT EMPTOR is the latin maxim. Buyer beware! is the rule in modern law. Every investor should investigate the companies he wants to invest into. Are there any limits to his investigation? No, except for time.

Some buyers are limited to English, where others read and speak 6 or 7 different languages. Are the multilingual buyers better informed? In most cases, yes. Is it fair and legal? Yes.

Some buyers know employees and former employees of companies, suppliers to companies or custumers of companies with information and opinions about the companies they want to invest into. Is it legal to talk with the employees, former employees, customers and suppliers, some of whom may be family relatives? Yes. Is it fair and legal that some investors don't talk with the same persons? Yes.

Most companies advertise their upcoming products 6 months to one year before the products are manufactured. Is it fair and legal? Yes. In a competitive market (where buyers are not forced to buy from sellers who are not forced to sell) where companies fight to get their customers, companies advertise their upcoming products and their features long before they are available in an effort to capture the attention and imagination of buyers, preventing them from buying from competitors. Is it fair and legal? Yes.

My point is that there is no secret about upcoming products, at least if you are willing to make the effort to investigate companies thoroughly.

"Insider trading" is strictly defined by corporate and securities laws and is not an open ended notion where anyone with information, any information, qualifies as an insider. There are limits to what is regulated as "insider trading".



It is supposed to be secret because there are NDAs that prevent suppliers and contractors from speaking about their engagements and programs. They're forbidden from revealing details and even the fact that they work with a particular company. This is the secret/are secrets.

Apple enjoys a HUGE advantage by keeping its plans to itself. It is almost impossible to calculate how much of Apple's value (for each product line - especially the iPad) is due to the fact that people don't talk about what they are up to. There is only one source for legit information, and that is Apple's events.


Your argument doesn't hold water. Knowing languages and walking around factories talking to employees gathering information is social engineering and each person that provides you a tidbit of information is committing a crime (the only difference being the scale, compared to expert networks).
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