Walter Shimoon was granted bail yesterday by U.S. Magistrate Judge Bernard G. Skomal in San Diego on conditions that included securing his bail with $120,000 of the equity in his home. Shimoon, a naturalized U.S. citizen from Canada according to his lawyer, has owned the home since 2003 with his wife, Linda Awdishu, a professor at the University of California at San Diego.
Shimoon agreed to appear Jan. 4 in federal court in New York, where the criminal complaint was filed. He hasn’t entered a plea to the charges against him.
“I’m going to take you at your word, Mr. Shimoon,” Skomal said. “You’ll be on the hook for $150,000 after the first of the year if you don’t show up in New York.”
Shimoon, 39, and two other technology firm employees were arrested the same day. U.S. prosecutors accuse the men of providing inside information about their companies to clients of Primary Global Research LLC, a consulting company that provides experts to investors. James Fleishman, an account representative at Mountain View, California-based Primary Global, was also arrested.
Assistant U.S. Attorney Marietta Geckos said during yesterday’s hearing that the government wasn’t opposed to bail. She asked that it be set at $1 million, with $300,000 secured by real property. She described the alleged crimes as insider trading “that crosses the whole country and all over the world.”
Flextronics officials said the alleged conduct has “jeopardized their relationship with Apple, a relationship that can be valued in the tens of millions of dollars,” Geckos said.
According to the criminal complaint unsealed Dec. 17, U.S. investigators made consensual and wiretap recordings of an unidentified expert-networking firm’s phones, the land lines of an unidentified hedge fund and the mobile phones of two of the defendants, Shimoon and a former employee of Advanced Micro Devices Inc., Mark Anthony Longoria.
Shimoon, Longoria 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, according to prosecutors in the probe led by U.S. Attorney Preet Bharara in Manhattan.
“A corrupt network of insiders at some of the world’s leading technology companies served as so-called consultants who sold out their employers by stealing and then peddling their valuable inside information,” Bharara said in a statement after the arrests.
If convicted of the wire fraud charge, the defendants face as long as 20 years in prison, said Edeli Rivera, a spokeswoman for Bharara’s office.
Skomal said he set Shimoon’s bail in line with other defendants in the case. Shimoon doesn’t have a criminal record and “has incredible support from the community and family, with two kids and a wife who is pregnant,” the judge said. One of the couple’s neighbors posted a $15,000 cashier’s check toward his bail.
Shimoon could be released today if all of his documentation is completed, Skomal said.
‘Tidbits’ of Data
Jeremy Warren, Shimoon’s lawyer, told the judge that prosecutors’ damages estimates were exaggerated, as was whatever role Shimoon played in the scheme. The information Shimoon provided was “only tidbits of technological data” that would have been of minimal value to anyone providing investment advice, Warren said.
Shimoon agreed to surrender his U.S. and Canadian passports and remain in San Diego County except for travel to his court appearances in New York.
Fleishman appeared in federal court in San Jose, California, Dec. 16 and was released on $700,000 bail. Longoria was granted $50,000 bail and freed by a federal magistrate in Austin, Texas. Karunatilaka got bail of $300,000 in federal court in Boston, said his lawyer, Brad Bailey.
The Dec. 16 arrests were the latest development in a nationwide investigation of illegal trading at hedge funds by Bharara, the Federal Bureau of Investigation and the Securities and Exchange Commission.
Flextronics is a supplier of cameras and battery chargers for Apple’s iPhone and iPod, according to the complaint. Prosecutors allege Shimoon provided inside information about Apple’s sales figures and product road map, including details about the iPad and iPhone 4 before the devices were released.
Steve Dowling, a spokesman for Apple, previously declined to comment.
Flextronics said it fired Shimoon.
“Flextronics has a practice of fully cooperating with regulatory inquiries and has clear policies prohibiting the release of confidential information about the company and its business partners,” Renee Brotherton, a spokeswoman the Singapore-based company, said Dec. 17 in a statement.
The case is U.S. v. Shimoon, 10-02823, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Bill Callahan in San Diego at email@example.com or .
To contact the editor responsible for this story: David E. Rovella at firstname.lastname@example.org.