Apple secrets at center of insider trading case

December 17, 2010

APPLE/The blockbuster insider trading case that shook Silicon Valley and Wall Street on Thursday likely gave Steve Jobs, Apple’s famously secretive CEO, a healthy case of heartburn this morning.

Four people were arrested on charges of leaking tech secrets to hedge funds–including details about Apple’s iPad months before Jobs took the tablet computer onstage with him to formally show off to the world.

According to the complaint, in October of last year, Walter Shimoon — who worked for Apple supplier Flextronics — was recorded in a phone conversation leaking information that tech geeks around the world lust for.

The complaint said that in 2009 Apple informed Flextronics about a “highly secretive project being developed that was internally known at Apple as ‘K48′”– which turned out to be the iPad.

Snippets from Shimoon’s taped phone conversation, as laid out in the complaint:

  • “They [Apple] have a code name for something new… it’s a new category altogether. And, uh, I speculate, it doesn’t have a camera in it..”
  • “So I speculated that it’s probably a reader…something like that. Um, let me tell you. It’s a very secretive program…”
  • “At Apple you can get fired for saying K48…that’s just how crazy they are about it…”

Shimoon also divulged a slew of important information about the iPhone. During an intercepted phone call between Shimoon and an unnamed hedge fund employee in March of 2010, he said:

  • “Production starts now. We are starting to load the supply chain up…they are telling everyone, they are telling their core suppliers to plan for 6 million a month…I think that their real number is more like 5 million, 4.5 to 5 million.”
  • “So I see this quarter, the number I see this quarter is about 8.8 million. Well, I am not manufacturing the phone. I just happen to know what the total number is.”

And in a final ironic twist, prosecutors detail an email Shimoon sent to employees of both Apple and Flextronics in late 2009, reminding them of the non-disclosure agreement that governed their work.

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