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Apple Reported New IPhone Was Stolen, Prosecutor Says

An Apple Inc. lawyer told law enforcement officials last week that a prototype iPhone belonging to a company engineer was stolen, sparking an investigation that led authorities to seize computers from an editor whose blog bought the device, a prosecutor said.

Technology blog Gizmodo.com said it obtained the next- generation phone after the Apple engineer lost it, leaving it in a bar in the San Francisco suburb of Redwood City on March 18. A patron found the device on a stool and handed it to another customer who sold it to Gizmodo for $5,000 after trying unsuccessfully to contact Apple, the blog said April 19.

An O’Melveny & Myers LLP lawyer representing Apple and the engineer contacted the San Mateo County District Attorney’s office to report the item as stolen, said Chief Deputy District Attorney Stephen Wagstaffe.

“They said there was a belief that this had been stolen and we want to make sure it’s investigated, and we agreed,” Wagstaffe said yesterday in a phone interview. “It was reported as stolen property.”

The lawyer and engineer were referred to California’s Rapid Enforcement Allied Computer Team, which started an investigation, Wagstaffe said.

Brian Hogan, the 21-year-old college student who sold the device to Gizmodo.com, “regrets his mistake in not doing more to return the phone,” his attorney, Jeffrey Bornstein, said yesterday in an e-mailed statement.

Photographer: Tony Avelar/Bloomberg

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Photographer: Tony Avelar/Bloomberg

Steve Jobs, chief executive officer of Apple Inc., speaks during the debut of the Apple iPad tablet at the Yerba Buena Center for the Arts Theater in San Francisco, California.

Bar Stool

Hogan was in a bar when someone handed him the phone after finding it on a stool and then left, according to his lawyer’s statement. When people sitting near Hogan said the phone wasn’t theirs, he took it with him, according to Bornstein. A friend told Hogan he would call AppleCare, the company’s product- support service.

When Hogan tried to open a page on the Facebook social- networking website on the phone, it shut down and was inoperable for the rest of the time he had it, Bornstein said.

“Even though he did obtain some compensation from Gizmodo, Brian thought that it was so they could review the phone,” Bornstein said. “Brian believed -- and Gizmodo emphasized to him -- that there was nothing wrong with sharing the phone with the tech press.”

Bornstein added, “Brian has been and is willing to cooperate.”

Apple goes to great lengths to restrict access to unreleased versions of products. Companies testing the iPad ahead of its April 3 debut had to promise to keep it quarantined in a room with blacked-out windows and keycard locks, people familiar with the matter said in March.

IPhone Sales

The iPhone accounted for 40 percent of Apple’s sales for the quarter ended March 10, compared with 27 percent for the same period last year. Shipments of the iPhone doubled to 8.75 million during the quarter, contributing to a 90 percent profit gain.

Steve Dowling, a spokesman for Cupertino, California-based Apple, didn’t immediately respond to voice-mail and e-mail messages seeking comment yesterday.

Gaby Darbyshire, chief operating officer at Gawker Media, owner of Gizmodo, didn’t immediately respond to a voice-mail and e-mail messages. Sonja Steptoe, a spokeswoman for O’Melveny & Myers, declined to comment.

Wagstaffe said no case has been submitted to the district attorney’s office. He said investigators know who sold the phone to Gizmodo. He declined to name the person.

Phone Returned

Gizmodo editor Jason Chen wrote about the unreleased phone on April 19, posting photos and a video of the phone and a list of features it said had been changed or were new. The blog said it returned the phone to Apple after receiving a written request from Apple General Counsel Bruce Sewell, a copy of which it posted on its website along with its response to the company.

“Just so you know, we didn’t know this was stolen,” Gizmodo Editorial Director Brian Lam said on the blog,”when we bought it.”

On April 23, members of the state’s computer crime task force “entered editor Jason Chen’s home without him present, seizing four computers and two servers,” according to an April 26 statement on Gizmodo’s site. Gawker asked police to return the machines, citing laws that protect online journalists from having newsroom equipment seized.

Wagstaffe said the crime task force has a court order that allows investigators to search the computers. Attorneys on the investigation team have researched the issues raised by Gawker and agreed not to search Chen’s computers until they have met with Gawker’s attorneys.

“We are not interested in” Chen except “as it relates to the potential theft of this phone,” Wagstaffe said. If the computers were seized improperly the evidence they may contain wouldn’t be admissible in court, he said.

To contact the reporters on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

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