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Last updated: August 17, 2010 6:30 pm
Asian component suppliers on Tuesday responded to allegations that they paid kickbacks to a former Apple procurement executive in return for business.
Paul Devine, accused by Apple in both a civil suit and a criminal case of taking more than $1m in improper payments from Asian suppliers, pleaded not guilty to the criminal offences on Monday and was returned to jail after the hearing in San Jose federal court.
Mr Devine has yet to respond in the civil case.
Prosecutors in the criminal case argued that Mr Devine remained a flight risk and that he should not be granted bail. The judge scheduled another bail hearing on Wednesday.
Kaedar Electronics of China, a unit of Taiwan’s Pegatron, and Cresyn of South Korea benefited from Mr Devine’s information, the Apple suit claims.
Apple said Cresyn and Mr Devine signed a “consulting services agreement” spelling out what Mr Devine was required to leak, including Apple product roadmaps and sales forecasts, in exchange for $6,000 in monthly payments. Cresyn said it did not offer Mr Devine any bribes nor did it give him any improper commissions. The South Korean earphone and headset maker stressed that it had a legal consulting contract with the Apple executive to receive information about trends in the US market.
“An Apple manager offered to provide us with business consulting to help us advance into the US market. So we signed a normal consulting contract, which was not illegal,” Cresyn said in a statement. “We received general information about the US market but did not receive any technology-related information.”
In Taiwan, Pegatron, the world’s biggest maker of computer motherboards, said it had begun an investigation and had suspended a Kaedar manager allegedly involved in the case.
Pegatron was part of Asustek, now the world’s fifth biggest PC maker, until it was spun off earlier this year as Asustek refocused from contract manufacturing to its own brand.
The wire fraud and money laundering indictment unsealed last week accuses Mr Devine, a five-year employee at Apple, of giving confidential information to a number of companies and coaching them as they bid to provide Apple with earphones and other iPod and iPhone components. The indictment also charges Andrew Ang of Singapore, who Apple says received at least 15 per cent of the kickbacks paid by his former employer, Jin Li Mould Manufacturing. Jin Li has declined to comment on the allegations. Shares of JLJ Holdings, of which Jin Li is a subsidiary, fell more than 13 per cent in Singapore.
JLJ said in a statement that it was investigating the allegations, and was “currently seeking legal advice and actively looking into the matter”. JLJ confirmed that Mr Ang was a former employee of Jin Li and said he left the company on May 28, 2009.
Apple’s suit says the company was investigating suspected wrongdoing in April when it found incriminating e-mails from Mr Devine on his work laptop. The suit says that the e-mails sent on personal accounts instructed his benefactors not to wire more than $10,000 at a time to avoid attracting attention and referred to pay-offs as “samples”.
Mr Devine earned more than $100,000 in average annual salary from Apple, plus stock and options, the company’s suit says.
He set up a California company and opened bank accounts in his wife’s name in order to take in the kickbacks, transferring more than $500,000 in illicit proceeds, the indictment says.
Additional reporting by Kevin Brown in Singapore
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