Dell, AMD, TSMC, Apple And Flextronics Insiders Charged by FBI With Conspiring to Distribute Inside Information
Executives at publicly traded technology companies have been
arrested by FBI on charges they sold inside information about
their employers.
FBI announced that JAMES FLEISHMAN, an Executive for an
"expert-networking" firm, was arrested this morning on wire fraud
and conspiracy charges for conspiring to provide confidential
information, including material, nonpublic information, to the
firm's clients, including hedge funds. DANIEL DEVORE, formerly a
Global Supply Manager for Dell, Inc., who worked as a consultant
for the Firm, previously pled guilty on December 10, 2010, to an
Information charging him with wire fraud and conspiracy to commit
wire fraud and securities fraud. FBI also announced the arrests
this morning of public company employees MARK ANTHONY LONGORIA,
WALTER SHIMOON, and MANOSHA KARUNATILAKA on wire fraud and
conspiracy to commit securities fraud and wire fraud charges in
connection with their employment as consultants for the firm.
Manhattan U.S. Attorney PREET BHARARA said: "Today's charges allege that 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. The detailed allegations in the Complaint, along with the guilty plea unsealed today, describe criminal conduct that went well beyond any legitimate information-sharing or good faith business practice. Over the next many months and beyond, we will continue to enforce the law, police the market, and protect honest businesses and their shareholders by working methodically with the FBI and SEC to root out corporate corruption and insider trading."
FBI Assistant Director-in-Charge JANICE K. FEDARCYK said: "The information trafficked by the four 'consultants' went way beyond permissible market research; it was insider information. And the fifth defendant was directly involved in the transfer of inside information from the consultants to hedge funds and other end users. The more than $400,000 the firm paid the four 'consultants,' merely to participate in phone calls with firm clients, is an indication of the value placed on the information. This wasn't market research. What the defendants did was purchase and sell insider information. Our investigation is most assuredly continuing."
According to the FBI, FLEISHMAN served as a Sales Manager for the "expert-networking" firm responsible for attracting new clients and ensuring service to existing clients. FLEISHMAN promoted the firm's consultation services by arranging for clients, including hedge funds, to speak with consultants knowing that consultants would provide confidential information to clients.
DEVORE was employed by Dell, Inc., as a Global Supply Manager. While employed at Dell, DEVORE provided confidential information about Dell and Dell's suppliers, the FBI said. Between late 2007 through August 2010, the "expert-networking" firm paid DEVORE approximately $145,750 for providing information.
LONGORIA was employed by Advanced Micro Devices, Inc. (AMD), as a Supply Chain Manager in Round Rock, Texas. As part of his employment with AMD, LONGORIA executed an employment agreement with AMD that restricted the disclosure of AMD confidential information. While employed at AMD, LONGORIA engaged in consultation calls with Firm clients. During the consultation calls, LONGORIA provided confidential AMD information, according to the FBI. For example, during telephone calls with cooperating witnesses in July 2009, LONGORIA provided AMD revenue information, average sales prices, product sales figures, and gross margin information. Between January 2008 and March 2010, the networking firm paid LONGORIA more than $200,000 for consultation services he provided.
SHIMOON was employed by Flextronics International, Ltd. (Flextronics), as a Senior Director of Business Development in San Diego, California. During the relevant time period, Flextronics had a business relationship with Apple, pursuant to which Flextronics supplied certain electronic components to Apple, including specifically-engineered camera and charger components to Apple for its "iPhone" cellular telephones and "iPod" portable media players.
As part of this business relationship, Flextronics and certain Flextronics employees were provided with information and forecasts regarding Apple purchase or shipping orders regarding certain Flextronics components, as well as information regarding alternative suppliers for Apple products. The confidentiality of this kind of information was governed by non-disclosure agreements executed between Flextronics and Apple. In addition, Apple often shared information with Flextronics about future Apple products under development. The confidentiality of this information was governed by a separate non-disclosure agreement executed between Flextronics and Apple. For example, in or about 2009, Apple informed Flextronics about a highly secretive project being developed that ultimately resulted in the public product launch of the "iPad" tablet computer.
SHIMOON also signed an employment agreement with Flextronics that restricted the disclosure of Flextronics confidential information and prohibited any business activity that competed with Flextronics' business.
While employed at Flextronics, SHIMOON engaged in consultation calls with the networking firm clients, during which he provided confidential Flextronics and Apple information, FBI said. For example, SHIMOON provided highly confidential sales forecast information and new product features for Apple's forthcoming "iPhone" cellular telephone. Between January 2008 and June 2010, the networking firm paid SHIMOON more than $22,000 for consultation services he provided.
KARUNATILAKA was employed by Taiwan Semiconductor Manufacturing Company, Inc. ("TSMC") as an Account Manager. As part of his employment with TSMC, KARUNATILAKA executed an employment agreement with TSMC that restricted the disclosure of confidential information and prohibited any outside employment.
While employed at TSMC, KARUNATILAKA engaged in consultation calls with Firm clients, during which he provided confidential TSMC information such as TSMC product sales and shipping information. Between January 2008 and June 2010, the networking" firm paid KARUNATILAKA more than $35,000 for consultation services he provided.
Manhattan U.S. Attorney PREET BHARARA said: "Today's charges allege that 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. The detailed allegations in the Complaint, along with the guilty plea unsealed today, describe criminal conduct that went well beyond any legitimate information-sharing or good faith business practice. Over the next many months and beyond, we will continue to enforce the law, police the market, and protect honest businesses and their shareholders by working methodically with the FBI and SEC to root out corporate corruption and insider trading."
FBI Assistant Director-in-Charge JANICE K. FEDARCYK said: "The information trafficked by the four 'consultants' went way beyond permissible market research; it was insider information. And the fifth defendant was directly involved in the transfer of inside information from the consultants to hedge funds and other end users. The more than $400,000 the firm paid the four 'consultants,' merely to participate in phone calls with firm clients, is an indication of the value placed on the information. This wasn't market research. What the defendants did was purchase and sell insider information. Our investigation is most assuredly continuing."
According to the FBI, FLEISHMAN served as a Sales Manager for the "expert-networking" firm responsible for attracting new clients and ensuring service to existing clients. FLEISHMAN promoted the firm's consultation services by arranging for clients, including hedge funds, to speak with consultants knowing that consultants would provide confidential information to clients.
DEVORE was employed by Dell, Inc., as a Global Supply Manager. While employed at Dell, DEVORE provided confidential information about Dell and Dell's suppliers, the FBI said. Between late 2007 through August 2010, the "expert-networking" firm paid DEVORE approximately $145,750 for providing information.
LONGORIA was employed by Advanced Micro Devices, Inc. (AMD), as a Supply Chain Manager in Round Rock, Texas. As part of his employment with AMD, LONGORIA executed an employment agreement with AMD that restricted the disclosure of AMD confidential information. While employed at AMD, LONGORIA engaged in consultation calls with Firm clients. During the consultation calls, LONGORIA provided confidential AMD information, according to the FBI. For example, during telephone calls with cooperating witnesses in July 2009, LONGORIA provided AMD revenue information, average sales prices, product sales figures, and gross margin information. Between January 2008 and March 2010, the networking firm paid LONGORIA more than $200,000 for consultation services he provided.
SHIMOON was employed by Flextronics International, Ltd. (Flextronics), as a Senior Director of Business Development in San Diego, California. During the relevant time period, Flextronics had a business relationship with Apple, pursuant to which Flextronics supplied certain electronic components to Apple, including specifically-engineered camera and charger components to Apple for its "iPhone" cellular telephones and "iPod" portable media players.
As part of this business relationship, Flextronics and certain Flextronics employees were provided with information and forecasts regarding Apple purchase or shipping orders regarding certain Flextronics components, as well as information regarding alternative suppliers for Apple products. The confidentiality of this kind of information was governed by non-disclosure agreements executed between Flextronics and Apple. In addition, Apple often shared information with Flextronics about future Apple products under development. The confidentiality of this information was governed by a separate non-disclosure agreement executed between Flextronics and Apple. For example, in or about 2009, Apple informed Flextronics about a highly secretive project being developed that ultimately resulted in the public product launch of the "iPad" tablet computer.
SHIMOON also signed an employment agreement with Flextronics that restricted the disclosure of Flextronics confidential information and prohibited any business activity that competed with Flextronics' business.
While employed at Flextronics, SHIMOON engaged in consultation calls with the networking firm clients, during which he provided confidential Flextronics and Apple information, FBI said. For example, SHIMOON provided highly confidential sales forecast information and new product features for Apple's forthcoming "iPhone" cellular telephone. Between January 2008 and June 2010, the networking firm paid SHIMOON more than $22,000 for consultation services he provided.
KARUNATILAKA was employed by Taiwan Semiconductor Manufacturing Company, Inc. ("TSMC") as an Account Manager. As part of his employment with TSMC, KARUNATILAKA executed an employment agreement with TSMC that restricted the disclosure of confidential information and prohibited any outside employment.
While employed at TSMC, KARUNATILAKA engaged in consultation calls with Firm clients, during which he provided confidential TSMC information such as TSMC product sales and shipping information. Between January 2008 and June 2010, the networking" firm paid KARUNATILAKA more than $35,000 for consultation services he provided.
