Manufacturing Partner Confirms Kickbacks Paid to Secure Apple Orders

[MacRumors]

The Wall Street Journal reports that Taiwanese manufacturer Pegatron has confirmed that its subsidiary Kaedar Electronics did pay kickbacks to an "intermediate trading company" in order to help land contracts with Apple between 2005 and 2008. It was unable, however, to confirm that Apple global supply manager Paul Devine, arrested late last week over the scheme, was the ultimate recipient of the funds.

Paul Shin Devine, a global supply manager at Apple, was arrested Friday on charges that he received some $1 million in kickbacks from six Asian suppliers. In a federal grand-jury indictment in the U.S. outlining offenses that include unlawful monetary transactions, Kaedar, along with five other companies, were said to have paid kickbacks to Mr. Devine for receiving confidential information that would let the companies negotiate favorable contracts with Apple.

In an interesting twist to the story, Pegatron has been rumored by The Wall Street Journal and other sources to be working with Apple to manufacturer a CDMA-based iPhone 4 that could operate on Verizon's network in the U.S. The alleged kickback scheme, however, occurred prior to Pegatron's acquisition of Kaedar in late 2008 and a Pegatron spokesman claims that the issue has not affected his company's relationship with Apple.

While Foxconn has served as Apple's manufacturing partner for the iPhone since its initial launch over three years ago, Apple and Pegatron do have an existing relationship for production of other devices such as the iPod shuffle. Kaedar has reportedly supplied Apple with iPod packing boxes since 2005.

Article Link: Manufacturing Partner Confirms Kickbacks Paid to Secure Apple Orders

 

[JAT]

Well, that certainly sounds like 'kickback' is the correct term.

 

[Kwill]

It's not like Apple doesn't pay its top-level employees enough.

 

[GlenL]

going from supplying packing boxes in the past, and now to the CDMA iPhone 4... Pegatron is moving up in the world!

 

[FFArchitect]

Can't get the imagery out of kickbacks being paid to a large robot that transforms into a gun.

 

[RawBert]

Guess Devine not as divine as he made out to be.

 

[spillproof]

Business is business.

 

[miknos]

Maybe Apple knew about it? Could be something to avoid taxes?

 

[Doctor Q]

You can't put the genie back in the bottle once confidential information is leaked. Luckily, the value of this information was probably useful only at the time it was received.

 

[Xavier]

It's not like Apple doesn't pay its top-level employees enough.

Really, I wonder what his salary was? Obviously not enough for him

 

[JAT]

It's not like Apple doesn't pay its top-level employees enough.

Really, I wonder what his salary was? Obviously not enough for him

There is no 'enough' for many people. Er, most people.

Hell, all people.

 

[doctor-don]

Maybe Apple knew about it? Could be something to avoid taxes?

Didn't Apple have the guy arrested?

Not likely Apple was attempting to avoid taxes.

You can't put the genie back in the bottle once confidential information is leaked. Luckily, the value of this information was probably useful only at the time it was received.

What confidential information? Those were kickbacks to get contracts with Apple.

What is interesting is that the Kaedar Electronics company did this prior to its being bought by Pegatron, and Pegatron confirms that Kaedar paid kickbacks.

And Pegatron did not supply product boxes, Kaedar did, GlenL.

 

[Mattie Num Nums]

Didn't Apple have the guy arrested?

Not likely Apple was attempting to avoid taxes.

Possible! Steve after all uses the $1 salary loophole to avoid higher taxes.

 

[Doctor Q]

What confidential information? Those were kickbacks to get contracts with Apple.

Kaedar, along with five other companies, were said to have paid kickbacks to Mr. Devine for receiving confidential information that would let the companies negotiate favorable contracts with Apple.

Perhaps they were told what to bid to win the contracts.

 

[Aries326]

Kickbacks is the nature of business in Asia. Steve Jobs is rich. Investors who have stuck with Apple have their money. This guy got his $1,000,000 or so. He probably even had a few massages with a happy ending thrown in there too during some of his business trips.

Big deal. Our government right now is missing a billion of our money which supposedly was sent to Iraq for the rebuilding process. That's our hard earned tax money being pissed away when it should have gone towards infrastructure here, schools, teachers, health care, etc...

 

[CFreymarc]

It's not like Apple doesn't pay its top-level employees enough.

This is what baffles me. A top Apple exec is usually doing around a million dollars a year when bonuses and profit sharing is included at a minimum. Why the extra sauce and where was it all going?

If it can be proven he took these anti-competitive kickbacks, things like this don't happen as an isolated act. I am sure his previous staff around him is quite on edge and one of Steve's left-hand-men* are on a hunt trying to find out who all knew and cooperated in this.

Also, I'm curious who is willing to go states evidence as they are shown the front door and a final paycheck. When you get booted from Apple hard like this, there are stories of the last paycheck prorated down to the minute they left the building.

* Left-hand-man, typically a leader's warlord or "hatchet man" getting rid of trouble. This is opposite to right-hand man who takes care of administrative and day-to-day responsibilities.

 

[MorphingDragon]

going from supplying packing boxes in the past, and now to the CDMA iPhone 4... Pegatron is moving up in the world!

Pegatron is the hardware division of Asus, they have always been up there.

 

[robotmonkey]

I don't see why this should be a legal issue. It should be an issue between this man, Apple, and the supplying company.

 

[gnasher729]

Maybe Apple knew about it? Could be something to avoid taxes?

How ould Apple avoid paying taxes? Oh, I see: Apple employee takes kickbacks. Contract is signed for more money than necessary. Apple makes less profit. Apple pays less taxes. Brilliant business strategy. Lose money to avoid taxes. Did you know you could save lots of income tax perfectly legally, just by telling your boss to cut your salary by half?

Kickbacks always hurt the company whose employee accepts kickbacks.

 

[SAD*FACED*CLOWN]

This is what baffles me. A top Apple exec is usually doing around a million dollars a year when bonuses and profit sharing is included at a minimum.

Where did you get these numbers homie? Who would risk a guaranteed million a year salary to take the same amount under the table?

 

[SeanMcg]

I don't see why this should be a legal issue. It should be an issue between this man, Apple, and the supplying company.

I think you mean criminal issue, but still, there are laws governing anti-competitive behavior, if that's what this was. Getting kickbacks to secure a contract certainly seems to fit that definition.

From what I've read, Apple has also started civil legal proceedings.

So this is very much a legal issue.

 

[JAT]

This is what baffles me. A top Apple exec is usually doing around a million dollars a year when bonuses and profit sharing is included at a minimum. Why the extra sauce and where was it all going?

It calls him a Supply Manager. Not sure that is a 'top exec'.

I don't see why this should be a legal issue. It should be an issue between this man, Apple, and the supplying company.

If nothing else, it was almost certainly undeclared income, which is illegal.

How ould Apple avoid paying taxes? Oh, I see: Apple employee takes kickbacks. Contract is signed for more money than necessary. Apple makes less profit. Apple pays less taxes. Brilliant business strategy. Lose money to avoid taxes. Did you know you could save lots of income tax perfectly legally, just by telling your boss to cut your salary by half?

True, it sounds silly, but it still happens all the time. Lose money (or 'create' extra expense) over here to cover where you made money over there.

 

[Master Chief]

The thing that pops out most is this part: "The lawsuit contends that Devine had warned his contacts not to send messages to his Apple email account, for fear of detection, but Apple's investigators accessed his personal Gmail and Hotmail correspondence."

Crooks. They keep making stupid little mistakes. I mean huge blunders. The easy fix is, I presume, to not read your personal e-mail address at work.