Bloomberg News

Apple IPad Data Was Given to Fleishman, Samsung Witness Says

September 15, 2011

Sept. 15 (Bloomberg) -- An ex-Samsung Electronics Co. manager, testifying at the insider-trader trial of Primary Global Research LLC executive James Fleishman, told jurors he disclosed confidential shipping data for Apple Inc. iPad components.

Suk-Joo Hwang, who worked for 14 years at the U.S. division of Suwon, South Korea-based Samsung, told jurors yesterday in federal court in New York after he was granted immunity from prosecution by U.S. District Judge Jed Rakoff, who’s presiding over the case.

Hwang said that during lunch at a restaurant in Mountain View, California, with Fleishman and a hedge fund manager he identified as “Greg,” he gave them confidential information about Samsung’s shipment of liquid crystal display screens it was supplying to Apple. The iPad made its U.S. debut in April 2010, four months after the lunch.

“One particular thing I remember vividly was that I talked about the shipment numbers of Apple, it was about iPad,” he said. “This is in December 2009, before it came out with the tablet PC, they didn’t know the name then, so I talked to them about the tablet shipment estimates in that meeting.”

Expert Networking

Fleishman, of Santa Clara, California, is charged with two counts of conspiracy for facilitating a scheme in which employees at public companies passed confidential information to fund manager clients of Primary Global, also known as PGR, a Mountain View-based expert-networking firm. He has pleaded not guilty to the charges and faces as long as 25 years in prison if convicted.

Samsung was a supplier for the iPad screens along with Seiko Epson Corp. and LG Display Co., Hwang said. Assistant U.S. Attorney Antonia Apps asked Hwang how Fleishman and the fund manager reacted to the information he was sharing.

“They didn’t know about it,” Hwang said, adding that the fund manager “was very excited.”

“In fact, I said, ‘Please, just keep this to yourself,’” Hwang testified, lowering his voice for the jury and gesturing downwardly with his right hand. “I remember after I said this, James, he was nodding his head.”

‘Freaked Out’

Hwang said that as soon as he spoke he realized that a man at a nearby table was staring at him. He said he became concerned the man was an Apple employee who’d overheard his comments. He told jurors he turned his company badge around to hide his name and Samsung logo.

“After I said it, I looked around,” Hwang said. “The first thing I thought was ‘Wow, I said it too loud’ and then I really freaked out.”

Hwang, who said he worked as a consultant for the PGR from 2004 to 2010, said he earned about $38,000 for his work as an expert-networking consultant.

He said he grew concerned about being discovered as a leak on Apple data. Soon after the lunch, Hwang said, he was told by a colleague that Samsung had lost a supply contract with Apple.

“I thought, ‘Oh that guy was an Apple guy and they found out,’” Hwang said. “I was scared.”

FBI Agents

After he received a promotion in February 2010, Hwang notified PGR executives that he wanted to stop working for them. He said Primary Global officials told him they would allow him to work anonymously and said they also offered to raise his consultation fee from $200 an hour to $350.

Hwang agreed and worked for PGR until August 2010. He said he was approached by Federal Bureau of Investigation agents in October when they came to his home and asked him about his work with PGR. He said he didn’t initially tell agents the truth about his actions.

Hwang said he was fired by Samsung in June 2011 and said he hasn’t been charged with any crimes. Under Rakoff’s order, Hwang’s testimony can’t be used against him and he can only be prosecuted if he commits perjury. His testimony continues today.

Chris Goodhart, a Samsung spokeswoman in San Jose, California, declined to comment on Hwang’s testimony. Steve Dowling, a spokesman for the Cupertino, California-based Apple, also declined to comment.

The case is U.S. v. Fleishman, 11-cr-00032, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Peter Blumberg, Michael Hytha

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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