Ex-Apple manager pleads guilty to $2.3M kickback scheme

Faces decades in prison, agrees to forfeit millions in ill-gotten gains

A former Apple manager accused of accepting kickbacks from Asian iPhone and iPod accessory suppliers pleaded guilty Monday in a San Jose, Calif. federal court, and has been ordered to forfeit $2.3 million in money and property.

In a statement issued Monday, the office of U.S. Attorney Melinda Haag said that Paul Devine, formerly a global supply manager at Apple, admitted to taking kickbacks. In return, Devine provided accessory suppliers with confidential Apple documents -- including sales forecasts, price targets and unreleased product specifications -- that gave the suppliers inside information to craft their contract bids with the Cupertino, Calif. company.

Devine was paid a percentage of the business generated by the suppliers contracts, Haag said.

Arrested in August 2010 after a fourth-month investigation by the FBI and the U.S. Internal Revenue Service, Devine entered a not-guilty plea soon after.

According to court documents, Devine and a partner, Andrew Ang, an employee of a Singapore supplier, ran the kickback scheme from February 2007 until their indictments more than three years later.

Although Devine was originally charged with 23 counts of wire fraud, wire fraud conspiracy, money laundering and engaging in transactions with criminally-derived proceeds, as part of an agreement he pleaded guilty to only one count of each of the four violations. He also admitted that the ensuing loss to Apple totaled $2.4 million.

Devine faces a maximum cumulative jail sentence of 70 years and may be liable for millions in fines. Jack Gillund, a spokesman for Haag's office, declined to comment on the likely sentence Devine will receive, instead pointing to the release which said the final total would be decided after the judge considers federal sentencing guidelines. Devine also agreed to forfeit nearly $2.3 million in cash and property as part of the plea arrangement he struck.

Devine used private e-mail accounts, including ones with Windows Live Hotmail and Gmail, the Web-based services operated by Microsoft and Google, respectively, to avoid suspicion as he managed the complex kickback scheme.

Apple uncovered Devine's kickback operation in April 2010 after imaging the hard drive of his company-supplied notebook, where it found a cache of Hotmail and Gmail messages that allegedly showed he provided suppliers with confidential information they used to secure contracts with Apple.

Using personal e-mail to transfer critical corporate information is actually widespread, Lexington, Mass.-based Ipswitch said last August. Its survey of IT professionals showed that more than two-thirds admitted they sent confidential company information via personal accounts each month. Forty percent said they used personal e-mail accounts to avoid any audit trail of what was sent and to whom.

Devine still faces a civil suit filed last year by Apple. However, that lawsuit was put on hold in mid-February, apparently in anticipation of a resolution of the government's criminal case.

"The parties believe that once the criminal case is resolved, the issues to be litigated in this case may be significantly narrowed thereby preserving resources of the parties and this Court," the stay order read.

Devine is currently on pre-trial release, and faces sentencing on June 6.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

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