Friday, December 17, 2010, 12/17/2010 10:25:00 AM

The Intersection of Trade Secrets and Insider Trading Law

By Todd

CNNMoney.com is running an interesting piece regarding the newly filed criminal complaint that accuses former Flextronics Senior Director of Business Development Walter Shimoon and others of surreptitiously disclosing information regarding Apple product developments to a now-cooperating witness from an unnamed hedge fund. The alleged purpose of the disclosure? To aid the hedge fund in trading equities, including Apple, on the disclosures.


The FBI, apparently tipped off that these unfortunate exchanges of information were occurring, obtained a wire-tap and was able to tape these explosive exchanges initiated by Mr. Shimoon:



Apple, he is heard telling CW-2, was "coming out next year" with a new iPhone that's "gonna have two cameras ... It'll be a neat phone because it's gonna have a five-megapixel auto-focus camera and it will have a VGA forward-facing videoconferencing camera." Apple announced the iPhone 4 -- with its two cameras -- eight months later.

Then he is heard telling CW-2 that "they [Apple] have a code name for something new ... It's ... It's totally ... It's a new category altogether... It doesn't have a camera, what I figured out. So I speculated that it's probably a reader. ... Something like that. Um, let me tell you, it's a very secretive program ... It's called K, K48. That's the internal name. So, you can get, at Apple you can get fired for saying K48." The iPad -- code named K48 -- was unveiled four months later.


These are detailed allegations. We don't know the details yet regarding why Shimoon and his compadres would engage in this kind of conduct but we're guessing it has something to do with money. We'll keep an eye on this one for you. This, folks, is where trade secret law meets insider trading law and that makes for interesting reading.




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