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Lost, Found IPhone Prototype Leads to 2 Arrests, Gizmodo Employees Cleared

Two California residents were charged with criminal misdemeanors for recovering a lost Apple Inc. (AAPL) iPhone 4 prototype last year and selling it to a technology blog, the San Mateo County District Attorney’s office said.

Brian Hogan, 22, of Redwood City and Sage Wallower, 28, of Emeryville each face one count of misappropriation of lost property. Wallower also was charged with possession of stolen property, District Attorney Stephen M. Wagstaffe said today in a statement.

Apple engineer Gray Powell had left the mobile phone prototype in a Redwood City bar in March 2010. Technology website Gizmodo.com later bought it for $5,000 and returned it to Apple in response to a request by the Cupertino, California- based company’s legal counsel.

Hogan and Wallower are scheduled to be arraigned Aug. 25, Wagstaffe said. No charges have been filed against employees of Gizmodo, a unit of Gawker Media, he said.

Kristin Huguet, a spokeswoman for Apple, declined to comment on the charges and deferred to the district attorney’s statement.

Gizmodo wrote about the iPhone prototype after disassembling it. The site said it wasn’t certain the phone was legitimate until receiving the letter from Apple lawyer Bruce Sewell on April 19.

The letter requested the return of “a device that belongs to Apple.” Gizmodo said it returned the prototype to the company that same day.

Prototype Found

If convicted, Hogan and Wallower face as long as one year in prison, San Mateo County Assistant District Attorney Morley Pitt said today in a phone interview.

Hogan found the prototype and later collaborated with Wallower on its sale to Gizmodo, the prosecutor said.

“If they recovered the phone and never did anything with it, it wouldn’t have been a crime,” Pitt said, explaining that the defendants had no legal obligation to return it to Apple.

Hogan has no prior criminal record, his lawyer, Jeff Bornstein, said today in an e-mailed statement responding to the charges. Bornstein said his client is “extremely remorseful” about not having returned the phone when he found it.

‘Fully Accepts Responsibility’

“Although we do not believe that charges of any kind should have been filed, Brian fully accepts responsibility for his actions,” said Bornstein, a partner in the San Francisco office of Pittsburgh-based K&L Gates LLP. “We are working cooperatively with the district attorney to resolve this misdemeanor charge promptly.”

Pitt said he didn’t have contact information for Wallower’s attorney.

The district attorney’s office declined to file charges against Gizmodo’s staff after attempting to determine where its constitutional right to freedom of the press ends and criminal law begins, an issue that Pitt said was “unresolved.”

“We concluded this was not the case to press that issue,” said Pitt.

Gawker, on its Gizmodo website, posted a statement saying it was pleased with Wagstaffe’s decision.

“While we have always believed that we were acting fully within the law,” the company said, “it has inevitably been stressful for the editor concerned, Jason Chen, and we are glad that we can finally put this matter behind us.”

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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