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Pegatron Suspends Kaedar Chief Amid Apple Employee Fraud Probe

Aug. 17 (Bloomberg) -- Pegatron Corp., spun off from Asustek Computer Inc., said it suspended the head of a Chinese unit after an Apple Inc. employee was charged with accepting payments from the subsidiary for confidential information.

“She believed that she had paid the money for commercial purposes and not for kickbacks,” Jonathan Chang, finance director at Pegatron, which bought Kaedar Electronics (Kunshan) Co. in 2008, said by phone today. The employee is the most senior manager at Kaedar, Chang said without disclosing her name.

Paul Devine, 37, a global supply manager at Apple pleaded not guilty to money laundering and wire fraud charges in a U.S. court yesterday after prosecutors said he received at least $1 million from Asian suppliers for providing information. Kaedar, South Korea’s Cresyn Co. and Singapore-based Jin Li Mould Manufacturing Pte. were among the companies named in a separate civil complaint brought by Apple against Devine.

Payments were made from Kunshan, eastern China-based Kaedar to Devine’s company, CPK Engineering, from 2007, Chang said. He wasn’t immediately able to say how much money was paid or how long the transactions continued.

The manager hasn’t been accused of any wrongdoing, and Pegatron has begun an internal investigation into the case, Chang said.

Pegatron rose 1.6 percent to close at NT$38.80 in Taipei trading after dropping as much as 4.8 percent. The stock lost 4.3 percent yesterday after the indictment.

Mechanical Parts, Moldings

Kaedar makes mechanical parts and plastic injection moldings, including cases for iPods and iPhones, Pegatron Chief Financial Officer Charles Lin said by telephone today. Paying commissions to agents for sales orders is common practice for Pegatron and the industry, while the company doesn’t pay bribes or kickbacks to secure business, Lin said.

Pegatron counts Apple among its customers while Kaedar doesn’t supply to Apple directly, Chang said.

Kaedar had revenue of NT$1.7 billion ($53 million) last year with net income of NT$170 million, according to the 2009 annual report of Asustek, the maker of the Eee PC low-cost computer. Pegatron was spun off from Asustek and listed on the Taiwan Stock Exchange on June 24 this year.

Seoul-based Cresyn, a maker of earphones, paid Devine for market consulting services under the terms of a contract that named Apple, spokesman Kim Chang Jun, said in a phone interview yesterday.

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: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Jonathan Annells at jannells@bloomberg.net.

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