Manufacturing Partner Confirms Kickbacks Paid to Secure Apple Orders [Updated]
The Wall Street Journal reports that Taiwanese manufacturer Pegatron has confirmed that its subsidiary Kaedar Electronics did pay kickbacks to an "intermediate trading company" in order to help land contracts with Apple between 2005 and 2008. It was unable, however, to confirm that Apple global supply manager Paul Devine, arrested late last week over the scheme, was the ultimate recipient of the funds.
Paul Shin Devine, a global supply manager at Apple, was arrested Friday on charges that he received some $1 million in kickbacks from six Asian suppliers. In a federal grand-jury indictment in the U.S. outlining offenses that include unlawful monetary transactions, Kaedar, along with five other companies, were said to have paid kickbacks to Mr. Devine for receiving confidential information that would let the companies negotiate favorable contracts with Apple.
In an interesting twist to the story, Pegatron has been rumored by The Wall Street Journal and other sources to be working with Apple to manufacturer a CDMA-based iPhone 4 that could operate on Verizon's network in the U.S. The alleged kickback scheme, however, occurred prior to Pegatron's acquisition of Kaedar in late 2008 and a Pegatron spokesman claims that the issue has not affected his company's relationship with Apple.
While Foxconn has served as Apple's manufacturing partner for the iPhone since its initial launch over three years ago, Apple and Pegatron do have an existing relationship for production of other devices such as the iPod shuffle. Kaedar has reportedly supplied Apple with iPod packing boxes since 2005.
Update: Reuters reports that Devine today pleaded "not guilty" to the criminal charges filed against him in relation to the scheme.
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