Four Insiders Charged With Revealing Product Plans of Apple, Dell, and Others

[aristotle]

Insider trading and leaking of insider information is a serious issue. It can affect earnings, share prices and the reputation of companies. Companies with leaks can face fines and lawsuits from government regulators and investors.

Everything that was leaked is insider information because it is information which is only available to employees, contractors or third parties working closely with the tech companies such as suppliers or sub contractors. That information is not readily available to investors and the general public.

You don't have to believe me. If you work for a publicly traded corporation, look for training material from your legal department. You can also ask the what constitutes insider trading and insider information from sites like grok law.

Temporary contractors can be considered insiders as even if they do not directly work for the company in question but their temporary employer does.

 

[Doctor Q]

thost two "bombshells" were not much more information that what could be guessed with 90% confidence by just looking where the technology goes. The iPad details where so vague that you got more info here on the board.

The inside information about iPhone 4 specs could easily be more valuable to an insider trader than the guesses of the masses. It can give an investor a minor edge to have a bit of knowledge others don't have about when and how Apple products will match up with the competition. As in Vegas gambling, a slight change in the odds can give you a big advantage.

 

[twoodcc]

well if you do the crime, you do the time....at least if you get caught

 

[CFreymarc]

So is Arn contributing to these folks' defense funds?

They violated an NDA. I have no sympathy for them. But unlike some, I don't care a huge amount for rumors - I'm more interested in the newsy stuff that comes through here.

I agree. NDA positions are almost traded like stock holdings in the valley. You sign at the bottom line, you are bound. Just make sure that there is an explicit expiration date. In some cases, I have seen legal defense invalidate NDAs in court over illegal clauses.

One of the most classic Silicon Valley defense is siting that Non-Competition Agreements in for any California resident or anyone doing business in California is illegal. Many out of state NDAs have been struck down in court on those grounds. Also, some legal departments forget to refresh an NDA of an employee after it expired. That has gotten many off the hook too.

I'm sure Apple has a hell of a court tested NDA considering which version was signed.

 

[pmjoe]

According to reports, Shimoon had signed a non-disclosure agreement with respect to his work with Apple through Flextronics, but revealed the information to Primary Global Research, which paid him more than $22,000 for his role as a "consultant" to the firm.

Without the articles filling in the "bombshell" between the lines sensationalism, the quoted statements alone could've been rather innocuous amongst other conversation. Obviously NDA was violated, but that isn't a crime. It's the involvement with insider trading that is.

The real question IMHO, is in what work this "consultant" did for the $22,000?

That said, Fortune and the WSJ probably had nothing more to go from than the US Attorney's charges filed, and their job is to make the accused look as guilty as possible.

 

[blahblah100]

I agree. NDA positions are almost traded like stock holdings in the valley. You sign at the bottom line, you are bound. Just make sure that there is an explicit expiration date. In some cases, I have seen legal defense invalidate NDAs in court over illegal clauses.

One of the most classic Silicon Valley defense is siting that Non-Competition Agreements in for any California resident or anyone doing business in California is illegal. Many out of state NDAs have been struck down in court on those grounds. Also, some legal departments forget to refresh an NDA of an employee after it expired. That has gotten many off the hook too.

I'm sure Apple has a hell of a court tested NDA considering which version was signed.

I may be wrong, but I was under the belief that non-compete agreements were simply unenforceable (for the most part). If so, that is MUCH different than 'illegal.'

Also, I'm sure they have ironclad NDA's considering Apple's legal department.

 

[Cartaphilus]

Everything that was leaked is insider information because it is information which is only available to employees, contractors or third parties working closely with the tech companies such as suppliers or sub contractors. That information is not readily available to investors and the general public.
.

To be technical about it, not all information exclusively available to insiders is "non-public material information" which prohibits the holder from directly or indirectly trading the company stock. The information must be "material", which generally is defined as information that a reasonable trader would wish to have when making a decision to buy, sell, or hold the company stock. I think what some posters have implied is only that some of the information allegedly sold was non-material. The dissemination of the information might, in that case, be a violation of the terms of an NDA, and redressable by a civil suit for damages, but it would not be a violation of the securities laws or regulations.

 

[MacNut]

If they just gave this info to wikileaks all would of been forgiven.

 

[Pigumon]

Why so many negative votes??

These guys are hurting Apple's sales and basically they are violating and agreement in a job that pays them a TON of money.

They deserve what they get.

Maybe all the negative votes are from the MacRumors staff?

 

[SandynJosh]

I know a guy who was in the clink for something similar. I think he did 5-6 years. Wrecked his life, and rightfully so. Not to mention, these people are wide open to suits from shareholders also.

...and not to mention, Bubba is always looking for a new "wife."

 

[Cloudane]

Well if they're still chasing them in the year 2823 they must've really disrupted the timeline. For Apple to be breaking the Temporal Prime Directive and all.

Wonder which month has become "Mag" over the centuries - May?

{/silliness}

Interesting time for secrecy in general, what with Wikileaks getting into lots of trouble as well. I wonder if we'll eventually see a trend towards nobody daring to leak anything anywhere - kind of chilling in its own way.

 

[JohnStrass]

insider

Without the articles filling in the "bombshell" between the lines sensationalism, the quoted statements alone could've been rather innocuous amongst other conversation. Obviously NDA was violated, but that isn't a crime. It's the involvement with insider trading that is.

The real question IMHO, is in what work this "consultant" did for the $22,000?

That said, Fortune and the WSJ probably had nothing more to go from than the US Attorney's charges filed, and their job is to make the accused look as guilty as possible.

"Consulting" work for us tech types is simply giving inside info. I gave up "consulting" in my medical tech area after I realized that the "analysts" did not actually care to understand what was ghappening with the technology, trends, or marketplace. Rather, they simply wanted to know the results of studies before publication.

 

[quietstormSD]

Let me guess Gene Munster from Piper Jaffrey isn't part of this investigation.

 

[pmz]

Da iLeakz!!1

Good grief, the only reason this is even a crime is because of Apple's absurd obsession with gestapo secrecy.

 

[Michaelgtrusa]

Prison!

 

[KnightWRX]

Everyone saying they deserved it for breaking their NDA obviously doesn't understand what is going on here. NDAs are civil matters and it is up to Apple to sue these guys for breaking these. The charges brought here are not about a private agreement between these guys and Apple. This isn't even Apple's doing, since Apple doesn't have any weight as far as criminal prosecution goes. Revealing Apple's secrets to the world is not a criminal act. However, selectively revealing tidbits to some people so that they can do stock market manipulation is.

 

[BuddyTronic]

Breaking NDA's like this for peanuts is amazing to me.

$22K is not a lot of money considering what kind of money can be made from receiving secret information in advance. Let's say you have millions of dollars of AAPL stock, it would be be worth a lot more than $22K to know in advance for certain whether or not facetime functionality was coming.

It's good that they prosecute these guys for getting caught doing it.

But remember - Google and MS probably have other moles.

Apple does the research, and the Dell's, MS, and Googles will copy.

On the surface they might get Balmer out there to say "it doesn't have buttons - what are they thinking?" - but in the background, they are hiring engineers to duplicate the functionality. haha.

Check out what the "smartphone" market looked like in Jan 2007 when Apple announced the iPhone. Now everyone has a touchscreen phone out there.

Same with the iPad. Look at those crappy "netbooks" that were so popular for a year or so, and compare to what they look like after the iPad was announced.

It's ridiculous the lack of imagination all other competitors have to match up against Apple.

Anyone reading here probably has a good chance to petition for the CEO position at these copycat companies I'd say.

 

[doctor-don]

So is Arn contributing to these folks' defense funds?

They violated an NDA. I have no sympathy for them. But unlike some, I don't care a huge amount for rumors - I'm more interested in the newsy stuff that comes through here.

A bit more serious than violating a NDA.

Walter Shimoon, 39, ex-manager at Flextronics International Ltd., was one of three technology firm employees arrested Dec. 16 on charges of wire fraud and conspiracy for allegedly providing inside information about their companies to clients of Primary Global Research LLC, a consulting company that provides experts to investors.

Shimoon, Longoria, of Advanced Micro Devices Inc. and Manosha Karunatilaka, who was employed at chipmaker Taiwan Semiconductor Manufacturing Co., were charged with wire fraud and conspiracy to commit securities fraud and conspiracy to commit wire fraud, prosecutors said.

If convicted of the wire fraud charge, the defendants face as long as 20 years in prison, Edeli Rivera, a spokeswoman for Manhattan U.S. Attorney Preet Bharara’s office, said.

Shimoon has been fired, Singapore-based Flextronics said.

 

[doctor-don]

Well if they're still chasing them in the year 2823 they must've really disrupted the timeline. For Apple to be breaking the Temporal Prime Directive and all.

Wonder which month has become "Mag" over the centuries - May?

{/silliness}

Interesting time for secrecy in general, what with Wikileaks getting into lots of trouble as well. I wonder if we'll eventually see a trend towards nobody daring to leak anything anywhere - kind of chilling in its own way.

From the complaint, it is obvious that MAG refers to the court in which it was filed, not a date, and it is a case number. And this happened this month, not in May.

The case is United States of America v. Shimoon et al., case number 10-MAG-2823, in the U.S. District Court for the Southern District of New York.

Longoria made about $200,000 from the allegedly illegal consulting work, while Shimoon and Karunatilaka made about $22,000 and $35,000 respectively, prosecutors say.

"This wasn't market research," Fedarcyk said in a statement. "What the defendants did was purchase and sell insider information. Our investigation is most assuredly continuing."

 

[santaliqueur]

Let me guess Gene Munster from Piper Jaffrey isn't part of this investigation.

It's probably the only Apple-related news he's NOT in.

I am so sick of hearing this guy's name.

 

[gnasher729]

These guys are hurting Apple's sales and basically they are violating and agreement in a job that pays them a TON of money.

They deserve what they get.

Maybe all the negative votes are from the MacRumors staff?

This must be very hard to understand, but this has nothing to do with hurting Apple's sales at all. These guys did _not_ hurt Apple's sales. They gave insider information to a very small group of traders who used that information to gain advantage on the stock market. That is why the SEC is after them, because they gained an illegal advantage on the stock market.

If MacRumors had bribed these people and published the information on MacRumors, which would obviously never happen, then Apple's sales _would_ be hurt and Apple would go after them, but the SEC wouldn't. Because information on MacRumors is available to anyone, including anyone trading Apple shares, so nobody would gain an unfair advantage on the stock market by reading and using information on MacRumors.

Revealing Apple's secrets to the world is not a criminal act.

I had to check that. And it seems that you are right, _revealing_ a trade secret is not a crime, but receiving a trade secret by improper means to gain a competitive advantage is.

 

[Cloudane]

From the complaint, it is obvious that MAG refers to the court in which it was filed, not a date, and it is a case number. And this happened this month, not in May.

I even marked my comment as silliness and it was still taken literally! Sense of humour FAIL, classic MacRumors

 

[MCP-511]

I'm sure their families are proud.

 

[charlituna]

The iPad details where so vague that you got more info here on the board.

They aren't getting the book tossed at them over the details so much as the whole "buy lots of stock right now because it is going to bust the roof soon" part of the game.

Just like in Vegas, the Stock Market is okay with you getting lucky. But not with you cheating

 

[diston]

iLeaks

All very wikileaks innit? I hear Lisa Jobs and Melinda Gates are alleging sexual misconduct against these guys, in the hope of having them extraordinarily renditioned to Cupertino where they will be put in orange boiler suits and deported to Foxconn for a life of slavery on the iPad production line.