One of the four men arrested for taking part in an insider-trading scheme at several major technology firms leaked confidential details of Apple's
The United States Attorney for the Southern District of New York and the FBI charged James Fleishman, Mark Anthony Longoria, Walter Shimoon, and Manosha Karunatilaaka with conspiracy to provide confidential information, conspiracy to commit wire fraud, and wire fraud. Another at the center of the insider trading scheme, Daniel Devore, agreed to a plea bargain.
According to the complaint, in late 2009 to early 2010, Shimoon, an employee at Flextronics
Shimoon also leaked details about what would eventually become the iPad, which was code-named the K48 at the time. Shimoon said he wasn't involved with the project but knew about it and speculated it was a reading device since it didn't have a camera or wasn't a phone. He also said "you could get fired" at Apple for mentioning K48 to the outside world.
Along with advance details about the iPhone and upcoming iPad, he also gave out sales information on the iPod and iPhone to hedge fund managers. Shimoon was paid $22,000 for "consultation services."
Fleishman was a sales manager for Primary Global Research, a Mountain View, Calif.-based research firm that provides institutional money managers and analysts with market intelligence. He acted as a liaison between the hedge fund managers and the employees at several tech companies, including Dell
The complaint says the employees from those companies would act as "consultants" and provide inside information such as advance sales figures or upcoming devices to the hedge fund managers, which were clients of Fleishman's firm. Primary Global Research would then pay the consultants for their inside information. The complaint says that at times Fleishman would act as a go-between, and at other times hedge fund clients would contact the "consultants" directly. Often, he arranged meetings between the clients and the consultants.
Longoria was a supply-chain manager at the Round Rock, Texas-based AMD. As a consultant, Longoria gave out advance revenue information to Primary Global Research clients. He gave out specific unit sales forecasts as well, according to the FBI. Longoria was paid more than $200,000.
Karunatilaaka, an account manager for Taiwan Semiconductor, provided financial information to clients. He gave information on wafer bookings, which showed how many wafers clients were ordering. Wafers are thin, round slices of semiconductor material from which microchips are made. He also provided information on the "inventory situation" of various clients of Taiwan Semiconductor. He was paid $35,000.
Devore, who pleaded guilty and could face a maximum sentence of 25 years in prison, leaked information about Dell's sales and revenue. He also provided confidential information about a few of Dell's suppliers, including Seagate
"The information trafficked by the four 'consultants' went way beyond permissible market research; it was insider information," FBI Assistant Director in Charge Janice Fedarcyk said in a statement. "And the fifth defendant was directly involved in the transfer of inside information from the consultants to hedge funds and other end users. The more than $400,000 the firm paid the four 'consultants,' merely to participate in phone calls with firm clients, is an indication of the value placed on the information. This wasn't market research. What the defendants did was purchase and sell insider information. Our investigation is most assuredly continuing."
"The detailed allegations in the complaint, along with the guilty plea unsealed today, describe criminal conduct that went well beyond any legitimate information-sharing or good faith business practice," Manhattan U.S. Attorney Preet Bharara said in a statement. "Over the next many months and beyond, we will continue to enforce the law, police the market, and protect honest businesses and their shareholders by working methodically with the FBI and SEC to root out corporate corruption and insider trading."
The FBI's Securities and Commodities Fraud Task Force is handling the case.
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