Pegatron Corp (和碩), a contract manufacturing arm under Asustek Computer Inc (華碩), yesterday said it has launched an internal investigation into allegations of kickbacks paid to an Apple Inc employee and that it has suspended the manager suspected of being involved.
“Pegatron was surprised to learn of the alleged conduct in media reports … Such conduct is reprehensible and in conflict with Pegatron’s principles and practices,” the company’s spokesman Charles Lin (林秋炭) said in a statement.
The company has suspended the manager, who has not been named, at its Chinese subsidiary, Kaedar Electronics Co (凱達), and the company will take all necessary and appropriate actions, Lin said.
“[The manager] believed that she was paying the money for commercial purposes and not as a kickback,” Jonathan Chang (張昭平), finance director at Pegatron, said by telephone yesterday.
The employee is the most senior manager at Kaedar, Chang said.
Pegatron acquired Kaedar in July 2008. Kaedar, established in 2001 in Kunshan, Jiangsu Province, primarily manufactures plastic packages for electronic products, including iPods.
Despite the fact that Kaedar is independently operated and managed, and the manager has not been accused of any wrongdoing, Pegatron will closely monitor the investigation, Lin said.
A US federal grand jury indicted Paul Devine, an Apple global supply manager, for allegedly taking at least US$1 million in kickbacks from six Apple suppliers in Asia. Devine, 37, pleaded not guilty on Monday to money laundering and wire fraud charges in a US court.
The indictment document released last week said Kaedar was among six Asian firms that received confidential information from Devine to help it negotiate favorable terms in supply contracts with Apple between 2005 and 2008.
The other companies accused include Cresyn Co in South Korea and Jin Li Mould Manufacturing Pte Ltd (精利製模) in Singapore.
Chang said payments were made from Kaedar to Devine’s company, CPK Engineering, from 2007. He did not say how much money was paid or how long the transactions continued.
Lin said paying commissions to agents for sales orders is common practice for Pegatron and the industry, while the company does not pay bribes or kickbacks to secure business, he added.
Pegatron’s shares appeared undeterred by its subsidiary’s scandal yesterday. The stock rose 1.6 percent to close at NT$38.8 (US$1.2) on the Taiwan Stock Exchange yesterday.
Brokerage firm Macquarie Equities Research is upbeat on Pegatron’s prospect, saying the company is emerging as a large electronics manufacturing services firm with new orders expected to come from Acer Inc (宏碁) and Apple.
About 60 percent of Apple’s products, such as iPhones, iPads and iMacs, are contract manufactured by Hon Hai Precision Industry Co (鴻海精密), and Pegatron may supply Apple’s CDMA iPhones from the first quarter next year, said analyst Daniel Chang (張博淇).
Pegatron has the potential to be a future second source for iPads or Macbooks as well, as Apple aims to cut dependence on Hon Hai, he said.
In addition to notebook orders from Asustek, Pegatron has won orders from Acer with shipments to begin within one to two quarters, Chang said.
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