March 1, 2011 2:38 am

Former Apple employee pleads guilty to fraud

A former Apple procurement manager has pleaded guilty to wire fraud and other charges in a multimillion-dollar kickback scheme.

Paul Devine entered a plea agreement on Monday in federal court in San Jose, California, accepting responsibility for one count each of wire fraud, conspiracy and money laundering, prosecutors said.

The ultimate loss to Apple was more than $2.4m, according to the agreement, and Mr Devine agreed to forfeit $2.25m in proceeds from his actions. He has been free on bail and is scheduled to be sentenced in June.

Mr Devine, 38, was indicted and arrested in August after a probe begun within Apple found incriminating e-mails and formal agreements for him to be paid for inside information.

The five-year Apple employee handled relationships with some iPod and iPhone suppliers as part of his job, earning more than $100,000 a year.

Citing court documents, prosecutors said on Monday that Mr Devine revealed confidential information, including product forecasts, pricing targets and product specifications to suppliers.

“In return, the suppliers and manufacturers paid Devine kickbacks, including payments determined as a percentage of the business they did with Apple”, the US Attorney’s office said. “The scheme enabled the suppliers and manufacturers to, among other things, negotiate more favourable contracts with Apple”.

Apple filed a civil lawsuit last year against Mr Devine and others, saying that companies who benefited from the plot included Jin Li Mould Manufacturing of Singapore, China’s Kaedar Electronics, and Cresyn of South Korea.

The evidence harvested from Mr Devine’s computer included a five-page “consulting services agreement” with Cresyn. It spelt out what information Mr Devine was required to provide, including Apple product road maps and sales forecasts, in exchange for $6,000 in monthly payments.

Cresyn said last year that it had entered into a legal agreement with Mr Devine, and had not offered him any bribes or improper commissions.

Kaedar is owned by motherboard maker Pegatron of Taiwan, itself a spin-off of Asustek. Pegatron said last year that it suspended a Kaedar manager as part of its investigations.

Jin Li parent JLJ Holdings also has said it was investigating the allegations.

In theory, Mr Devine could face 20 years in prison for each count, but his actual sentence will depend on federal guidelines that could substantially reduce the term.

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