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Warrant Confirms Editor Could Face Felony Charges over iPhone Prototype

New details continue to emerge regarding the “lost” iPhone 4G phone that Gizmodo purchased and exposed in April. We knew that Apple was not pleased, especially when they whispered into the ear of the Silicon-Valley-based sheriff’s department, but the release of the search warrant issued confirms just how deep the legal ramifications go. The warrant, obtained by Scribd, confirms that the iPhone is being treated as stolen, the purchase of the phone is being considered the purchase of stolen goods, and the shape the iPhone was returned to Apple in is being treated as a case of malicious damage.

Most of this we suspected when the San Mateo County Sheriffs kicked in the door of Gizmodo editor Jason Chen’s house, but this confirms the extent of severity that Apple and the police are pushing for. Chen has been questioned by police, but he has not been charged yet. Those charges may soon be coming though, as all of the charges being investigated as part of the search warrant are felonies.  Although the search warrant is specifically for Chen, it also paints a darker picture for Brian Hogan, the man that found and sold the phone.

The search warrant is specifically investigating Chen for the following crimes:

“Buy or receive stolen property; Theft-Without authority make or cause to be made a copy (definition includes photography) of any article representing a trade secret; Maliciously damages property of another valued over $400”.

Each crime is a felony in California.

The warrant outlines the investigation by Matthew Broad, a San Mateo County Sheriff detective, and a member of the Rapid Enforcement Allied Computer Team (REACT). Broad confirms that he met with Apple representatives on April 20th, the day after Gizmodo posted the story of the iPhone prototype.

The Apple reps confirmed that Robert “Gray” Powell lost the prototype phone on March 25th. The phone soon appeared on Gizmodo, and the Apple reps claimed that the release of the prototype information would hurt current sales of the iPhone, as customers would wait for the newer model and spurn the current generation of phone, “thereby hurting overall sales and negatively effecting Apple’s earnings.” Apple reps could not give an exact estimate of losses, but they stated that the numbers would be “huge.”

When asked about the monetary value of the iPhone, Apple reps stated that it was invaluable, but it was at least worth the $8,500 to $10,000 that Hogan sold it for. Originally, the dollar figure was reported to be $5,000, but it appears Gizmodo promised Hogan an additional $3,500 once Apple officially announced the phone, and possibly a further $2,500 bonus, although no one is sure what that money is for or when it would be paid.

The report then explains how Apple discovered Hogan’s involvement. On the April 19, Hogan’s roommate, Katherine Martinson, called Apple and told them that Hogan had sold the phone to Gizmodo. Martinson said that she believed that Hogan had connected the phone to her computer without her authorization, and she wanted to absolve herself of criminal responsibility. This may be damning to Hogan, as it confirms that at least one person let him know that the device was stolen and that there could be severe legal repercussions.

Broad confirms that Hogan found the iPhone in the bar that Powell left it. The story also confirms that a bar patron handed Hogan the phone, thinking it was his. Hogan then stayed for a bit at the bar before returning home with the phone.

Hogan returned home and told Martinson that he was able to briefly connect to the iPhone, and that he learned that the phone belonged to Gray Powell. The software was then remotely wiped by Apple, and Hogan removed the 3G case and realized that it was not a typical iPhone. Martinson claims that Hogan is technically proficient, and he soon suspected that the phone was a prototype, due to the new features such as the forward-facing camera. He then attempted to connect the phone to Martinson’s computer in order to reload an OS and make the phone work again, but he was unsuccessful.

Hogan then searched for Powell online and discovered through LinkedIn that Powell was an engineer at Apple. He finally realized exactly what he had, and he knew the value of the phone.

He then contacted Gizmodo, PC World, and Engadget in an attempt to start a bidding war. Hogan knew that the publication of the iPhone details would generate hits to the website of whoever won the bidding war, and within 10 days, Chen had offered Hogan $10,000 for the phone. Gizmodo would pay $5,000 on delivery, with another $3,500 paid once Apple officially announced the phone. No one is sure about the conditions attached to the remaining $2,500.

Hogan has since apologized for his actions, and claims that he regrets not doing more to return the phone. This apology rings a bit hollow, as Martinson confirms that she, and others tried to convince Hogan to return the phone because the sale could ruin Powell’s career. According to the documents, Hogan responded, “Sucks for him. He lost his phone. Shouldn’t have lost his phone.”

In interviews with Powell, the Apple engineer says that he recalled placing the phone in his bag, but the bag was knocked over a few times in the busy bar and that the phone likely fell out. He also says that it was possible, although unlikely that someone took the phone from his bag.

When Broad went to Hogan’s house, he told Hogan that he was not yet being charged, and that it was imperative that Hogan cooperated and that any attempt to destroy evidence would be an obstruction of justice and Hogan would immediately be arrested. Hogan then confirmed that Thomas Werner, Hogan’s roommate, had taken his computer, a flash drive with evidence, and Apple stickers from the prototype phone, and left the house. Hogan called Werner, who eventually confirmed that the laptop was at a local church. Officers seized the laptop, but the flash drive has yet to turn up. As for the stickers, Werner claimed to have lost them at a local gas station. Broad searched the station and recovered the stickers. Broad believes that Werner is also culpable for the iPhone theft and subsequent sale, but again, no charges have been filed.

The search warrant more or less confirms the information we have been hearing for weeks now, but it is telling to see Hogan’s role in all of this, especially the fact that he may have known exactly what he was doing, and did it anyway.

Last week a second iPhone prototype may have turned up on the Web, this time in Vietnam. No word yet on where this phone came from. Some are suggesting that it is a Chinese knock-off, but the stickers and serial codes seem to suggest it is real.