Apple Suppliers Investigate Kickback Charges

Two of Apple’s Asian suppliers have launched their own investigation into an Apple manager’s alleged kickback scheme, according to Reuters, while another protested its innocence in the matter.

Paul Shin Devine, a global supply manager for Apple, was arrested on 13 August and charged with 23 counts related to the supposed $1m (£644,000) worth of kickbacks. The charges include wire fraud and money laundering. The federal grand jury indictment also named Andrew Ang, a Singapore-based employee of an Apple supplier; Ang’s location remains unknown.

Kickbacks

According to the indictment, Devine offered six unnamed Asian suppliers confidential information on Apple’s purchasing plans for product components. In return, he allegedly received more than $1m in bribes and kickbacks, filtered through a network of US and offshore bank accounts.

While the Asian suppliers went unnamed in the indictment, three of them have come forward to either protest their innocence or claim they’ve launched investigations of their own. South Korea-based Cresyn, which manufactures earbuds for the iPod, admitted paying fees to Devine but said the interaction was strictly above-the-board.

“Devine approached us first and offered to give us business consulting to help advance into the US market,” an unnamed official at Cresyn told Reuters on 17 August. “We accepted his offer and received general information about US markets, and in return we offered him a small consulting fee. But this was based on a legal contract we made with him in 2007.”

Success And Pressure

Meanwhile, Pegatron and JLJ Holdings – from Taiwan and Singapore, respectively – announced they had launched investigations into their own alleged involvement. The indictment names Kaedar, a Pegatron acquisition later spun off into its own entity, as a kickback source.

“We are investigating the case now and feel sorry about this,” Jonathan Chang, a deputy spokesperson for Pegatron, told Reuters.

Both federal investigators and Apple allege that the kickbacks continued for at least three years, with suppliers using the information as leverage in their negotiations with Apple. Devine pleaded not guilty to the charges on 16 August, and is currently in custody of the US Marshals Service. The case is being heard in US District Court, Northern District of California (San Jose).

Apple’s booming success with many of its product lines represents a potential windfall for components suppliers – but that popularity also comes with its own pressure. Over the past few months, manufacturers such as LG Display have complained that demand for parts have strained their inventories.

“We can’t meet it all,” Kwon Young-soo, chief executive of LG Display, told reporters from Reuters and other media outlets on 22 July. “Apple may have to delay launches of the iPad for some countries due to tight component supplies and strong demand.”