On May 14th, the search warrant used to search Gizmodo employee Jason Chans home was unsealed. The purpose of the warrant was to seek authorization to search the residence of Jason Chen for evidence related to the purchase of the iPhone prototype, copying (photographic images and video), and publishing of the iPhone prototype by Jason Chen.
When the police met with Apple representatives, they asked the value of the prototype and George Riley (of O’Melveny and Mylers, LLP) stated it was invaluable and that he could not place an amount on it. Riley was asked if the phone was worth at least $8500 and Riley said that it was. Riley goes on to say that the publication of the device and its features are immensely damaging to Apple. Riley could not provide an estimated loss, but believed it was huge.
Part 1: Was The Seller Remorseful?
On April 19th, Rick Orloff (Director, Information Security) received a phone call from Katherine Martinson, Brian Hogan’s roommate. Brian Hogan allegedly sold the iPhone to Gizmodo. Martinson contacted Apple due to the fact that Hogan connected the stolen iPhone to her computer and she was afraid the iPhone would be traced back to her. Martinson tells authorities that Brian Hogan was at the Gourmet Haus Staudt Restaurant drinking with friends. Hogan told her that an intoxicated male tried to give him an iPhone that was left on a stool believing that it belonged to Hogan. Hogan was there for a while longer, but no one claimed the phone, so he took it home.
Once Hogan arrived at his residence, he removed the case which was an iPhone 3GS disguise and saw that the phone was not a typical iPhone. Hogan told Martinson that he accessed the Facebook app on the device to learn that the owner of the phone was Gray Powell. Hogan and Martinson did an internet search for Gray Powell and discovered he was an engineer for Apple.
According to Martinson, Hogan knew from the software and the features that this was a prototype and knew it was valuable. Hogan contacted Gizmodo, PC World, and Engadget in attempt to start bidding for the iPhone prototype. Within 10 days, Hogan was contacted by Jason Chen, who offered $10,000 for the iPhone.
From her conversations with Hogan, she believes that Hogan was aware that selling the phone to a magazine would hurt Apple sales and/or profits. Martinson and other friends attempted to talk Hogan out of selling the iPhone prototype on the basis that the sale would ruin the career of Gray Powell, and Hogans response was “Sucks for him. He lost his phone. Shouldn’t have lost his phone.”
Hogan later showed Martinson a camera box that contained $5000. Hogan told her that the money was a result of selling the phone to Jason Chen of Gizmodo. Hogan told her that he had received a total of $8500 for the sale, and would receive a cash bonus from Gizmodo in July if and when Apple makes an official product announcement regarding the new iPhone.
Part 2: Did Gizmodo Want To Return The Phone With No Strings Attached?
Bruce Sewell (Senior Vice President, General Counsel and Secretary) told authorities that after Gizmodo released its story regarding the iPhone Prototype that Steve Jobs (Apples CEO) contacted the editor of Gizmodo, Brian Lam. Jobs requested that Lam return the phone to Apple. Lam responded via email that he would return the phone to Apple on the condition that Apple provided him with a letter stating that the iPhone belonged to Apple. Here are parts of that email:
“Hey Steve, this email chain is off the record on my side.
I understand the position you’re in, and I want to help, but it conflicts with my own responsibilities to give the phone back without any confirmation that it’s real, from Apple, officially.
Something like that – from you or Apple legal – is a big story that would make up for giving the phone back right away. If the phone disappears without a story to explain why it went away, and the proof it went to Apple, it hurts our business. And our reputation. People will say this is a coordinated leak, ect…
Right now, we have nothing to lose. The thing is, Apple PR has been cold to us lately. IF affected my ability to do my job right at iPad launch. Se we had to go outside and find our stories like this one, very aggressively.
I want to get this phone back to you ASAP. And I want to not hurt your sales when the products themselves deserve love. But I have to get this story of the missing prototype out, and how it was returned to Apple, with some acknowledgement it is Apple’s.
And I want to work closer with Apple, too. I’m not asking for more access – we can do our jobs with or without it – but again, this is the only way we can survive while being cut out on things. That’s my position on things.”
Apple did return the phone, but it was damaged. Apple employees were unable to power on the device. The damage occurred as a result of the phone being disassembled. Here is a list of the damages:
Gizmodo had photos and videos of the iPhone assembled and disassembled. They also had photos of Jason Chen holding the phone, a copy of the letter sent by Apple confirming the phone belonged to Apple, and a narrative about how the phone was found and bought by Gizmodo.
If Brian Hogans roommate Katherine Martinson is telling the truth, I sincerely hope that Hogan gets some jail time, fined, and a felony on his criminal record. From Martinson’s statement, it appears that Hogan did not want to return this device its rightful owner. He knew almost immediately who the phone belonged to thanks to the Facebook app on it. He also knew where Gray Powell worked after researching it on the internet.
This statement right here from Brian Hogan is what really takes the cake in my opinion: “Sucks for him. He lost his phone. Shouldn’t have lost his phone.”
There was no remorsefulness in Hogans heart and conscience, just dollar signs in both eyes. I hope he gets what he deserves.
Gizmodo….They are a news site, and it is their job and responsibility to the public to provide breaking news such as an iPhone prototype being found, but they did it in such bad taste.
First off, they did not have to name Gray Powell as the person that lost the prototype and possibly ruin his career. They could have published the story and left his name out. They would have generated just as many hits to the story with or without Powells name in it. Next, when Steve Jobs asked for the device to be returned, editor Brian Lam appeared like a terrorist holding someone hostage with a list of demands.
Lam could have simply returned the phone. Everyone already knew it was Apple’s. but alas Lam wanted to milk the story even more and get a letter from Apple to be able to write a few more articles and get a few more million hits to their website.
Unless there is pertinent information we don’t have yet, this is pretty cut and dry: Hogan found a phone that did not belong to him, figured out what it really was, and found out who the owner was. He did not return it or turn it in to the police, instead he started auctioning it off to major tech media sites. He sold property that did not belong to him unlawfully. Gizmodo knew the device was not Hogans, which would mean it was stolen property, but bought it anyway. They then disassembled the device and damaged it. When Apple asked for it back, they put stipulations on returning the device to Apple.
Both parties deserve to be charged and prosecuted of crimes.
The actual search warrant can be found here
Here is a list of articles I have written on the iPhone Prototype from the very beginning of this mass media event: