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Search warrant and affidavit detail Apple's role in missing-iPhone investigation

May 14, 2010 |  2:04 pm

The search warrant and affidavit unsealed at the request of The Times and other media outlets sheds more light on a case that has generated a great deal of public interest in Apple Inc.'s role in the investigation of its missing prototype iPhone. Download Affidavit

According to the search warrant, Apple CEO Steve Jobs contacted technology blog Gizmodo.com editor Brian Lam to ask him to return the prototype that the electronics giant said was stolen after a company engineer lost it in a bar, according to the court documents released Friday.

Apple closely guards unreleased versions of the iPhone, which generated $13 billion in sales in 2009. Lam told Jobs in an e-mail that he would return the phone if Apple confirmed that it was the prototype and that it belonged to Apple, according to the affidavit by Det. Matthew Broad of the San Mateo County Sheriff's Office, who is part of the REACT task force which investigates high-tech crimes.

Gizmodo published a copy of that letter from Apple’s General Counsel Bruce Sewell on its site.

The REACT task force has been investigating Apple's claim that the prototype was stolen. It broke down the front door of Jason Chen, the Gizmodo editor who had the phone, and seized his computer and other electronics. Gizmodo, owned by Gawker Media, said it paid $5,000 for the phone.

Media organizations sought to have the affidavit unsealed to determine whether the task force had a legal basis to break into the home of a journalist.

According to the affidavit, investigators from the REACT task force believe Brian Hogan found or stole the prototype phone that was accidentally left at a Redwood City restaurant by Apple employee Robert "Gray" Powell. Hogan knew that Powell was the phone's owner, they say. But rather than return the phone to Powell or to Apple, he tried to spark a bidding war among technology publications to buy it, the court filings allege. Hogan's lawyer, Jeffrey Bornstein, could not be reached for comment.

Hogan ultimately sold the iPhone to Jason Chen, who disassembled it and damaged it, according to investigators. They also accuse Hogan of trying to conceal or destroy evidence that would show his involvement.

According to the affidavit, Det. Matthew Broad met with Apple's director of information security Rick Orloff, its general counsel Sewell and attorney George Riley of O'Melveny & Myers on April 20. Riley said the publication of the device and its features were "immensely damaging" to Apple, harming sales of the current iPhone because people would wait for the new phone to be released and "negatively affecting" Apple earnings. Riley could not provide an estimated loss but said it was "huge." Orloff was allegedly tipped off on April 19 by Hogan's roommate Katherine Martinson that Hogan was the one who had taken the phone. Martinson declined to comment to The Times on the investigation.

Powell told investigators that he and his uncle spent about two hours drinking at the Gourmet Haus Staudt, a German restaurant in Redwood City on the evening of April 21, leaving shortly before the 11 p.m. closing time. He said he placed the phone in his bag on the floor at his feet.

The bag was knocked over at one point and he said it's possible it fell out. He said it was possible but unlikely that anyone stole it.

The search warrant paints a picture of a gold-digging Hogan who understood the value of the phone and attempted to sell it to the highest bidder.

According to the affidavit, Martinson told investigators Hogan knew the phone was a prototype and that it would be worth a lot of money. Martinson said Hogan told her that after a drunk man handed him the phone after it was left on a barstool. Hogan removed the cover and figured out that it was a prototype. He found the phone's owner by accessing Powell's Facebook account on the iPhone and who Powell worked for by looking up his LinkedIn account. He then contacted Gizmodo, PC World and Engadget, according to the warrant.

Within 10 days of finding the phone, Hogan made contact with Chen, who offered $10,000 for the phone, Martinson told investigators. She said Hogan met with Chen on three occasions. When she asked Hogan why Gizmodo would pay him so much, he said that the website would receive "millions and millions of hits." She also said she thought Hogan knew that selling the phone for "maximum profit" would hurt Apple's sales and profits. When Martinson and a friend tried to talk Hogan out of selling the phone, saying it would ruin Powell's career, Hogan reportedly said: "Sucks for him. He lost his phone. Shouldn't have lost his phone." Hogan claimed he would be paid $8,500 for the phone.

Martinson said Hogan later showed her a camera box that contained $5,000 in $100 bills. He said he would receive a cash bonus from Gizmodo when Apple made an official product announcement about the new iPhone in July. Gizmodo has said it paid $5,000 for the phone.

As investigators were preparing a search warrant for Hogan's residence on April 21, the affidavit said, Martinson phoned to say that Hogan and a third roommate, Thomas Warner, were aware of the investigation and were removing evidence from the residence. By the time San Mateo County Sheriff's Office units responded, Hogan and Warner had left in separate vehicles with Hogan's computer and other digital media. Investigators tracked down Hogan at his father's home. They convinced Hogan to help retrieve the items that he said were in Warner's possession. Warner dropped off the computer at a local church. He denied knowing where the other digital items, such as a thumb drive, were located. Later he said he lost the stickers that Hogan had peeled off the prototype iPhone and led prosecutors to a thumb drive under a bush, according to the document.

Chen and Gizmodo are not characterized as suspects in the warrant. Investigators argued they could find evidence on Chen's computers detailing Hogan's involvement in the case. The warrant makes no mention of his work as a journalist.

During Friday's hearing, Cretan said he was aware of Chen's status and sealed the warrant to protect his work as a journalist. Attorneys for the media coalition, including The Times, question in their motion whether the raid on Chen's home violated California's shield law, which limits the power to issue warrants for reporters' materials. The criminal inquiry has been stalled while prosecutors try to reach an agreement with Chen's attorney, Thomas Nolan, to search the seized computers.

Chief Deputy Dist. Atty. Steve Wagstaffe defended the search last week, saying his office had reviewed it and that it was proper.

Outside the courtroom Friday, Deputy Dist. Atty. Chris Feasel said several people had cooperated with investigators and the warrant had been sealed to protect them.

-- Jessica Guynn in San Mateo and David Sarno in Los Angeles
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