Apple's Recent Procurement Woes

We’ve read as many of the news stories on this topic as possible to bring you the following synopsis. Most of the details are widely available across all sources, but in the case that an interesting detail or fact came from one particular article, we’ve cited the source (see our footnotes). Otherwise, there is a listing of articles for further reading at the bottom of the page, with date, source and a link (click on the article's title to access it at its source).

The Timeline

July 2005 - Paul Shin Devine was hired by Apple as a mid-level global supply manager, dealing with Asian suppliers – “Most of the companies Devine is accused of selling information to have been described as being located in China, Singapore, Taiwan, and South Korea.¹”.   The half-dozen companies involved in the scheme are not named in the indictment².

April 2010 - Apple started an investigation after finding evidence of the scheme on Devine’s Apple-owned laptop.  “According to the civil suit brought up by Apple against the former employee, the company found a cache of emails through an internal investigation that showed that Devine was sending confidential information to third party suppliers.“⁴

Allegedly “he [Devine] would offer Apple suppliers details of Apple’s forthcoming product roadmaps, specifications, and pricing goals, and the companies would use that information in order to craft bids for contracts with Apple, knowing where they had the Cupertino company over a barrel and where they didn’t¹.

“Kaedar Electronics of China, a unit of Taiwan’s Pegatron, and Cresyn of South Korea benefited from Mr Devine’s information, the Apple suit claims. … The South Korean earphone and headset maker stressed that it had a legal consulting contract with the Apple executive to receive information about trends in the US market”³.

“The indictment also charges Andrew Ang of Singapore, who Apple says received at least 15 per cent of the kickbacks paid by his former employer, Jin Li Mould Manufacturing.”³

13 August 2010 – Devine was arrested following a joint FBI/IRS investigation, charged with 15 counts of wire fraud, 1 count of wire fraud conspiracy, 6 counts of money laundering, and 1 count of engaging in transactions with criminally derived proceeds. The wire fraud and money laundering charges were based on steps he took to conceal the source of the kickbacks he received.

The same day, Apple filed a civil suit against Devine for taking bribes, accusing him of “abusing his position, violating Apple policies and breaking the law by stealing Apple’s proprietary, trade secret and other confidential information and converting it to his own benefit”. The civil case is currently on hold pending the outcome of the criminal case¹.

16 August 2010 – Devine plead not guilty in U.S. District Court (San Jose)

28 February 2011 - Devine plead guilty to wire fraud conspiracy and money laundering (he is currently out on pre-trial release). Part of his plea bargain requires him to surrender funds and property amounting to $2.28M (he has admitted that his actions earned him $2.4M). “Devine is admitting to one count of each violation; he faces up to 20 years in prison and several hundred thousand dollars in fines.”¹

One of the things that varies across the accounts is how much time Devine may have to spend in prison. The numbers range from 20 years (above) to 50 years⁶ to 70 years⁷.  From reading the US Attorney’s press release, he may have to serve 20 years for each count of wire fraud/conspiracy to commit wire fraud, 20 years for each count of money laundering, and 10 years for each count of engaging in transactions with criminally derived proceeds⁵.

6 June 2011 - Devine is scheduled to appear for sentencing,

Cited Articles

¹ Apple Executive Paul Devine Please Guilty in Kickback Scheme, Digital Trends  (1 March 2011)

² Apple Manager Arrested in Kickback Scheme, Digital Trends (16 August 2010)

³ Asian Suppliers Respond to Apple Bribery Charges, Financial Times (17 August 2011)

⁴ Former Apple Employee Pleads Guilty to Receiving Kickbacks, Techland (1 March 2011)

⁵ Former Apple Employee Pleads Guilty in Kickback Scheme, USDOJ  Press Release (28 February 2011)

⁶ Former Apple Manager Pleads Guilty to Wire Fraud in Kickback Scheme, LA Times (1 March 2011)

⁷ Former Apple Employee Admits Receiving Kickbacks, ITProPortal (2 March 2011)

Further Reading

Apple Supply Manager Indictment: Does Lucrative Supplier Business Warrant Unscrupulous Business Practices and Behavior, Supply Chain Matters (16 August 2010)

Apple Supply Chief Faces Corruption Charges, Supply Management (17 August 2010)

The After-effects of the Apple Related Supplier Kickback Claims, Supply Chain Matters (23 August 2010)

Apple Buyer in U.S. Took Bribes, Supply Management (2 March 2011)