Syber News

Apple is famous for its secrecy around new products. Small wonder, as with the performance of Apple stock, insider information could be critical. On Thursday, four people were arrested on charges of leaking insider info about technology companies to hedge funds.

The people arrested on Thursday worked for Primary Global Research, a Mountain View, CA.-based company that called itself an “expert network,” either as employees or consultants. Expert networking firms connect hedge funds, mutual funds, and investors with industry insiders, who can provide insight, but not inside information.

Those arrested included James Fleishman, a vice president and sales manager at PGR; and consultants Mark Anthony Longoria, a supply-chain manager with AMD; Walter Shimoon, a senior director of business development at Flextronics; and Manosha Karunatilaka, an account manager at Taiwan Semiconductor Manufacturing.

Another consultant, Daniel DeVore, pleaded guilty to charges on Dec. 10. A former global supply manager at Dell, he is cooperating with authorities.

Among the evidence noted in the complaint on Thursday was a conversation between Shimoon and an unnamed "cooperating witness" (CW-2) employed by a hedge fund. Key among those facts leaked were:

• Q3 iPhone sales figures, which were still unannounced.
• Info about a new iPhone that's "gonna have two cameras ... It'll be a neat phone because it's gonna have a five-megapixel auto-focus camera and it will have a VGA forward-facing videoconferencing camera." That, of course, was the iPhone 4, which Apple did not announce for another eight months.
• K48, a codename for a product in a new category. Shimoon said "It's a new category altogether... It doesn't have a camera, what I figured out. So I speculated that it's probably a reader. ... Something like that. K48 turned out to be the iPad, and was unveiled four months later.

More interesting is a statement Shimoon made which confirms what many have said before, about Apple's secrecy. He said, "At Apple you can get fired for saying K48."

The WSJ has an extensive report on the case. Manhattan U.S. Attorney Preet Bharara is prosecuting the case. He said that "a corrupt network of insiders at some of the world's leading technology companies ... sold out their employers by stealing and then peddling their valuable inside information."

Janice Fedarcyk, a Federal Bureau of Investigation assistant director in charge of the investigation, said, "The information trafficked by the four 'consultants' went way beyond permissible market research. It was insider information."

Those arrested have been charged with wire fraud and conspiracy to commit wire fraud.