Supply Chain Matters has featured a number of previous commentaries concerning the prestige, scale and business growth potential for being selected as a supplier within any part of Apple’s supply chain. Being chosen a supplier to Apple can lead to millions of dollars of revenue given the role in Apple’s product value-chain. Unfortunately, such as potential comes with unsavory motivations to secure influence.
In 2011, a former global supply manager at Apple was charged with wire fraud, money laundering and unlawful transactions involving an alleged kickback scheme involving at least $1 million in kickbacks from multiple Apple suppliers. This individual admitted receiving kickbacks from six different Asia based suppliers in exchange for Apple related confidential information and subsequently pleaded guilty to the charges.
This week, after a year of investigation, Taiwan based prosecutors charged several former employees, including a former general manager, of global contract manufacturer Foxconn with allegedly taking kickbacks and bribes from supply chain partners. This case was initially made public in January of 2013 when Foxconn indicated that an internal audit discovered abnormalities and an employee in China was turned over to police authorities. Foxconn issued a statement confirming that an internal investigation found violations related to the procurement of consumables and accessory equipment needs. The contract manufacturer further confirmed that all the employees in question were no longer employed.
A posting on Patently Apple delves far deeper into the alleged incident as indicates: “former senior executives and employees of its surface mount technology (SMT) technology committee, which is responsible for the company’s procurement of related equipment and materials, had engaged in collective corruption.” The authors quote a Chines based publication indicating that: “kickbacks could have topped over NT$1 billion (US$33.1 million) in 2012 given that Foxconn as a whole purchases over several tens of billions worth of equipment and materials a year.” The authors further speculate as to whether this alleged scheme involved the selling of information related to the production processes involving the manufacturing of the Apple iPad.
Obviously, more of the facts will come to light as the individuals in question are given their day in court.
In the meantime, this is yet another reminder that difficult and challenging economic times can sometimes bring out the worst in individuals and thus strong internal controls related to the sourcing and procurement of technology sensitive goods is a continued must.