Former Samsung manager testifies to leaking iPad info to hedge fund
Witness testimony from a former Samsung manager during an insider trading trial has revealed that he leaked early information on the iPad to representatives from an "expert network" firm and a hedge fund.
Suk-Joo Hwang, a 14-year veteran of Samsung, testified in a federal court on Wednesday after being granted immunity from prosecution, Bloomberg BusinessWeek reports. He admitted to having lunch in Mountain View, Calif., with Primary Global Research executive James Fleishman and a hedge fund manager and providing confidential information about Samsung's shipment of LCD screens to Apple for the iPad.
Samsung served as one of the suppliers for the original iPad. Apple is expected to be the South Korean electronics giant's largest customer this year with an estimated $7.8 billion in orders.
"One particular thing I remember vividly was that I talked about the shipment numbers of Apple, it was about iPad,? he said. ?This is in December 2009, before it came out with the tablet PC, they didn?t know the name then, so I talked to them about the tablet shipment estimates in that meeting.?
Fleishman faces 25 years in prison if convicted of the two counts of conspiracy he has been charged with. He was arrested last December as part of a wide-ranging Securities Exchange Commission probe investigating the practice of expert networks, which charge a fee to connect investors with employees of companies.
When asked how Fleishman and the fund manager reacted to the information he provided, Hwang said, ?They didn?t know about it,? adding that the fund manager ?was very excited.?
?In fact, I said, ?Please, just keep this to yourself,?? Hwang testified while reenacting the scene. ?I remember after I said this, James, he was nodding his head.?
Hwang said he quickly became concerned that they had been overheard by an Apple employee. "After I said it, I looked around,? he remarked. ?The first thing I thought was ?Wow, I said it too loud? and then I really freaked out.?
The witness acknowledged that he had earned roughly $38,000 for his work as a consultant. He said he grew especially worried that he would be discovered as a leak after learning that Samsung had lost a supply contract with Apple.
?I thought, ?Oh that guy was an Apple guy and they found out,?? Hwang said. ?I was scared.?
After serving as an expert-network consultant for six years, he was contacted by the Federal Bureau of Investigation last October in connection with the insider trading probe. According to a court order from U.S. District Judge Jed Rakoff, Hwang's testimony can't be used against him and he can only be prosecuted if he commits perjury. Hwang was fired by Samsung in June.
One U.S. Attorney has described the charged individuals as "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."
After Fleishman and several consultants were arrested, FBI Assistant Director-in-Charge Janice Fedarcyk went on record as saying, "The information trafficked by the four 'consultants' went way beyond permissible market research." For instance, Fleishman allegedly told an executive cooperating with authorities: "Whatever you're looking for, whether it is short term or long term, we'll have people."
A former employee of an Apple supplier was arrested in connection with the probe. Walter Shimoon, who served as senior director of business development at Flextronics, is accused of providing "highly confidential" sales forecasts for an unreleased iPhone, as well as leaking information about the iPad. Unlike Fleishman, who has pleaded not guilty, Shimoon has pleaded guilty to charges of conspiracy to commit wire fraud and security fraud.
Suk-Joo Hwang, a 14-year veteran of Samsung, testified in a federal court on Wednesday after being granted immunity from prosecution, Bloomberg BusinessWeek reports. He admitted to having lunch in Mountain View, Calif., with Primary Global Research executive James Fleishman and a hedge fund manager and providing confidential information about Samsung's shipment of LCD screens to Apple for the iPad.
Samsung served as one of the suppliers for the original iPad. Apple is expected to be the South Korean electronics giant's largest customer this year with an estimated $7.8 billion in orders.
"One particular thing I remember vividly was that I talked about the shipment numbers of Apple, it was about iPad,? he said. ?This is in December 2009, before it came out with the tablet PC, they didn?t know the name then, so I talked to them about the tablet shipment estimates in that meeting.?
Fleishman faces 25 years in prison if convicted of the two counts of conspiracy he has been charged with. He was arrested last December as part of a wide-ranging Securities Exchange Commission probe investigating the practice of expert networks, which charge a fee to connect investors with employees of companies.
When asked how Fleishman and the fund manager reacted to the information he provided, Hwang said, ?They didn?t know about it,? adding that the fund manager ?was very excited.?
?In fact, I said, ?Please, just keep this to yourself,?? Hwang testified while reenacting the scene. ?I remember after I said this, James, he was nodding his head.?
Hwang said he quickly became concerned that they had been overheard by an Apple employee. "After I said it, I looked around,? he remarked. ?The first thing I thought was ?Wow, I said it too loud? and then I really freaked out.?
The witness acknowledged that he had earned roughly $38,000 for his work as a consultant. He said he grew especially worried that he would be discovered as a leak after learning that Samsung had lost a supply contract with Apple.
?I thought, ?Oh that guy was an Apple guy and they found out,?? Hwang said. ?I was scared.?
After serving as an expert-network consultant for six years, he was contacted by the Federal Bureau of Investigation last October in connection with the insider trading probe. According to a court order from U.S. District Judge Jed Rakoff, Hwang's testimony can't be used against him and he can only be prosecuted if he commits perjury. Hwang was fired by Samsung in June.
One U.S. Attorney has described the charged individuals as "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."
After Fleishman and several consultants were arrested, FBI Assistant Director-in-Charge Janice Fedarcyk went on record as saying, "The information trafficked by the four 'consultants' went way beyond permissible market research." For instance, Fleishman allegedly told an executive cooperating with authorities: "Whatever you're looking for, whether it is short term or long term, we'll have people."
A former employee of an Apple supplier was arrested in connection with the probe. Walter Shimoon, who served as senior director of business development at Flextronics, is accused of providing "highly confidential" sales forecasts for an unreleased iPhone, as well as leaking information about the iPad. Unlike Fleishman, who has pleaded not guilty, Shimoon has pleaded guilty to charges of conspiracy to commit wire fraud and security fraud.
Comments
In the full article from Bloomberg, the US Assistant Attorney is named Antonia Apps. Maybe the government does have a sense of humor.
Suk-Joo Hwang
These stories get better and better every day.
Apple is big business. Trading in Apple secrets is big business too. This is probably just the tip of the iceberg.
Was that low sum worth it for somebody to lose their job over and become involved in illegal insider trading?
Apple is a multi billion dollar business, if I was working for Samsung and if I decided to become a dirty rat, then I would definitely try and get a much bigger payday out of such highly valuable and illegal information. This Suk-Joo Hwang dude sounds like a real moron.
Either way if you're going to betray/backstab/underhand/etc Apple...at least make over a million for the risk...that's like selling Cocaine for 1 dollar profit a gram.
Is this Samsung mobile? Because it sounds like it's not.
Either way if you're going to betray/backstab/underhand/etc Apple...at least make over a million for the risk...that's like selling Cocaine for 1 dollar profit a gram.
What's a good margin ummm, for comparison purposes. . .
This is how it is done. Why big money stays big. Corporations may be "people", but they are "people "with no morals. There is no money in it.
What's a good margin ummm, for comparison purposes. . .
well I mean...when I was younger it was cheap and since I've aged I've fallen out of those circles who would know for sure but I've heard it's much more expensive now...but in the Northeast US (mainly NY upstate and Northeast NJ) a gram would go for 50-60 bucks. Depending on your connection you could get a kilo for about 25k-35k (40k if you had a middle middle man) so you're looking at up to 100% profit at the street level per gram sold. In other words...risk is worth reward (subjective, I know...it wasn't worth it for me due to moral implications and increased police presence).
I know it use to go for over 100 a gram in Maryland...and I believe it was less than 50 in the NYC metro area.
But yea...$38,000 for Apple secrets (plural)? The definitive trendsetters in tech? he must've been severely desperate, stupid, or a bad negotiator. Only way that would make sense is if he only sold up to about 3 secrets. Otherwise get a second job. lol
These company will pay you anywhere from a few hundred $ for your time to a few thousand depending on your background and how many people they have you meet with. There is nothing illegal about this as long as your not share information which is not public or it is specific to what you do for a company.
The less up front part of this, and what many of these companies hope happens is you share so sort of information which is not public knowledge or is very specific as this guy did. Usually the person sharing the information did not do it on purpose, it just comes out in the question and answer. However, what happen over time is these SME like that fact that people are interested in what they have to say and they just begin sharing more and more as they get more an more attention and money.
Most of these Market Research company providing access to the expert networks are the ones who taking advantage of people, they befriend these people and wine and dine them and hope they share information they can use as in this case.
Why is it funny?
Why is it funny?
He's dyslexic. He has switched the phonemes in 'Joo' and 'Hwang' and then pronounced it.
Also, he's childish.
This is not surprising. In fact, it's likely commonplace. What is surprising is that, with all the inside dope they pay for, the analysts still consistently misfire on their predictions. Can they be indicted for being wrong all the time?
The easiest way to be an analyst is to apply past results to future performance. This does not account for innovation, which is where Apple shines.
The same thing happens all the time in tech, where innovation matters. Look at how few analysts thought the Wii would be anything but Nintendo's last gasp.
This is not surprising. In fact, it's likely commonplace. What is surprising is that, with all the inside dope they pay for, the analysts still consistently misfire on their predictions. Can they be indicted for being wrong all the time?
Yes, it happens - even though it's illegal. Furthermore, it probably puts Samsung in violation of the NDA they signed with Apple.
The other factor here - if Samsung's panel division is sharing information with hedge funds, does anyone doubt that the other Samsung divisions (read: tablet division) were also getting inside information about Apple products? That is a huge no-no and could cost Samsung a fortune - either in lawsuits or in Apple pulling even more business away from Samsung. Why should Apple trust a company which has been proven to be untrustworthy?
Heck, just today there was a news story about a different South Korean company which pulled a stunt on trade secrets - and cost them nearly a billion dollars:
http://www.processingmagazine.com/news/9/2011/2427/DuPont-awarded-$920-million-in-trade-secrets-lawsuit
He's dyslexic. He has switched the phonemes in 'Joo' and 'Hwang' and then pronounced it.
Also, he's childish.
I am not dyslexic