Prosecutors file charges in prototype iPhone case

San Mateo County District Attorney's office tells CNET it's filed misdemeanor theft charges against two men who allegedly sold a prototype iPhone last year to the Gizmodo gadget blog.

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The San Mateo County District Attorney's office has filed criminal charges against two men who obtained a prototype iPhone 4 last year and sold it to the gadget blog Gizmodo, CNET has learned.

Brian Hogan, the man who acknowledged finding and selling the iPhone, is being charged with theft. Brian Hogman's Facebook page

Steve Wagstaffe, the district attorney, said in an interview today that his office has filed misdemeanor theft charges against Brian Hogan, the man who allegedly found the prototype in a bar after it was left there by an Apple engineer. An arraignment has been scheduled for August 25.

The second man charged is Sage Robert Wallower, who allegedly contacted technology sites last year while shopping around the iPhone 4 prototype. Wallower, a former Navy cryptologic technician who was scheduled to graduate from UC Berkeley in 2010, told CNET last year in an in-person interview at his home: "I didn't see it or touch it in any manner. But I know who found it."

Neither Gizmodo nor its parent company, Gawker Media, has been charged with any crime, Wagstaffe said. Nor have any of Gawker Media's employees, including the editor whose home was raided by police armed with a search warrant.

Apple declined to comment this morning. Wallower did not respond to interview requests.

The investigation began early last year when Robert Gray Powell, a 28-year-old Apple computer engineer, left an unmarked prototype iPhone in a German beer garden in Redwood City, Calif. Hogan, who at the time was a 22-year old student, found the prototype and sold it to Gizmodo for $5,000.

"Although we do not believe that charges of any kind should have been filed, Brian fully accepts responsibility of his actions."
--Jeff Bornstein,
Brian Hogan's lawyer

Wagstaffe, who was elected district attorney in June 2010, said a few months ago that the investigation has taken so long because his colleagues have been busy on other cases. San Mateo County encompasses part of what's commonly called Silicon Valley, with San Francisco to the north and Apple's headquarters of Cupertino to the south in Santa Clara County.

Court documents unsealed last year at the request of CNET and other media organizations show that Apple pressed local police to investigate the loss of a next-generation iPhone a day after Gizmodo published photographs, telling investigators that the prototype was so valuable that a price could not be placed on it.

Apple CEO Steve Jobs introduced what became known as the iPhone 4 last June, and it appeared in stores later that month. (See our review.) Jobs was eventually interviewed as part of the investigation.

Related stories:
The people involved in sale of lost iPhone revealed
Apple spurred police in iPhone probe
Gizmodo e-mail to Jobs: 'We have nothing to lose'
Lost iPhone prototype spurs legal action (roundup)

For over a year, speculation had centered on Hogan as the target of criminal charges based on a state law involving lost or stolen property. Under a California law dating back to 1872, any person who finds lost property and knows who the owner is likely to be--but "appropriates such property to his own use"--is guilty of theft. In addition, a second state law says any person who knowingly receives property that has been obtained illegally can be imprisoned for up to one year.

Jeff Bornstein, Hogan's attorney, issued a statement today: "Brian Hogan, who has never been in trouble with the law...is extremely remorseful for not having done more to return the cell phone he found in a Redwood City bar...Although we do not believe that charges of any kind should have been filed, Brian fully accepts responsibility of his actions. We are working cooperatively with the district attorney."

Convictions have resulted in cases that involved a person knowing that such an item probably belonged to someone else. "It is not necessary that the defendant be told directly that the property was stolen. Knowledge may be circumstantial and deductive," a California appeals court has ruled. "Possession of stolen property, accompanied by an unsatisfactory explanation of the possession or by suspicious circumstances, will justify an inference that the property was received with knowledge it had been stolen." State law says that lost property valued at $100 or more must be turned over to police.

The Gourmet Haus Staudt is the German-themed bar where Brian Hogan obtained the phone. Greg Sandoval/CNET

Law enforcement officials previously indicated they were looking into the possibility of filing criminal charges against Gizmodo or Gawker Media.

"We are pleased that the District Attorney of San Mateo County, Steven Wagstaffe, has decided, upon review of all of the evidence, that no crime was committed by the Gizmodo team," Gawker said in a statement. "While we have always believed that we were acting fully within the law, it has inevitably been stressful for the editor concerned, Jason Chen, and we are glad that we can finally put this matter behind us."

One obstacle to pursuing criminal charges against a news organization are journalist protection laws. That's what has been argued by the Reporters Committee for Freedom of the Press and like-minded advocacy groups, which say police violated the federal Privacy Protection Act, which broadly immunizes news organizations from searches--unless the journalists themselves committed the crime.

Also, California law may provide protections to writers for newspapers, magazines, and "other periodical publications," a term that a California court has applied to an Apple blog before.

But courts also have ruled that journalists suspected of criminal behavior do not benefit from the legal shields that newspapers and broadcast media have painstakingly erected over the last half century. "It would be frivolous to assert--and no one does in these cases--that the First Amendment, in the interest of securing news or otherwise, confers a license on either the reporter or his news sources to violate valid criminal laws," the U.S. Supreme Court has warned.

The San Mateo County criminal case number is SM376949.

Update 11:56 a.m.: Added comments from Brian Hogan's attorney.