Apple Manager Pleads Not Guilty to U.S. Charges He Took Supplier Kickbacks

Apple Inc. manager Paul Devine pleaded not guilty today to charges that he took at least $1 million in kickbacks from Asian suppliers.

Devine, 37, a global-supply manager, was accused of money laundering and wire fraud in a 23-count indictment unsealed Aug. 13 in federal court in San Jose, California.

Assistant U.S. Attorney Michelle Kane objected to releasing Devine on bail, saying there is a risk he will try to flee.

There are no bond conditions that can assure his appearance for trial, Kane told U.S. Magistrate Judge Howard Lloyd, who set a bail hearing for Aug. 18.

Kane and Devine’s lawyer, Raphael M. Goldman, declined to comment after court today.

Each count of wire fraud, wire fraud conspiracy, and money laundering may bring a 20-year prison sentence, prosecutors said.

Devine gave the suppliers of iPhone and iPod accessories confidential data that helped them win better contracts from Cupertino, California-based Apple in exchange for payments, according to the indictment. The scheme, which brought in more than $2.5 million in kickbacks, lasted from about February 2007 until this month, prosecutors said.

The suppliers included China’s Kaedar Electronics Co., Cresyn Co. of South Korea, and Singapore-based Jin Li Mould Manufacturing Pte., according to a civil complaint Apple filed against Devine. Kaedar is owned by Pegatron Corp., the manufacturing unit spun off from Taiwan’s Asustek Computer Inc., and makes plastic cases for products such as iPhones and iPods, although it doesn’t supply to Apple directly.

Bank Accounts

Devine used a chain of foreign and domestic bank accounts, along with one front company, to receive payments, according to court papers. Code words, such as “sample,” were used to refer to the payments to avoid raising the suspicions of other Apple employees, and he would also have bank transfers wired to his wife’s name, prosecutors said.

He allegedly shared some proceeds with Andrew Ang, 35, who was employed by Jin Li. Ang also was named in the indictment. He hasn’t been arrested, said Jack Gillund, a spokesman for the U.S. Attorney’s office in San Francisco.

As part of the scheme, Devine registered a company with the California Secretary of State and disguised the source of the payments. He transferred the fraudulent proceeds to his personal account, prosecutors claim.

Apple said it sued Devine on Aug. 13, claiming breach of contract, racketeering and breaching fiduciary duty. The company is seeking disgorgement of ill-gotten gains, other damages, and an order barring the misappropriation of Apple’s confidential information.

“We have zero tolerance for dishonest behavior inside or outside the company,” Apple spokesman Steve Dowling said. Dowling didn’t immediately return a message seeking further comment.

Apple paid Devine $614,000 in salary and $51,076 in bonuses, along with 4,500 Apple stock options and 900 shares of restricted stock over a five-year span, according to the complaint.

The case is U.S. v. Devine, 10cr603, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

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