How Gizmodo escaped indictment in iPhone prototype deal

District attorney says there wasn't sufficient evidence to prosecute Gizmodo editors for extortion, despite then-Apple CEO Steve Jobs accusing the gadget blog of precisely that.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Declan McCullagh Former Senior Writer
Declan McCullagh is the chief political correspondent for CNET. You can e-mail him or follow him on Twitter as declanm. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
Greg Sandoval
Declan McCullagh
4 min read

The great iPhone prototype caper of 2010 has finally ended, with the two men accused of shopping the device to gadget blogs sentenced to probation yesterday.

Last year's investigation began with a raid on Gizmodo editor Jason Chen's Fremont, Calif., home, followed by a painstaking examination of Chen's electronic files. Investigators suggested at the time that Chen could face criminal charges, and he soon hired a criminal defense attorney.

But San Mateo County District Attorney Steven Wagstaffe told CNET yesterday that there was not enough evidence to indict Chen or anyone else affiliated with Gizmodo.

Gizmodo editor Jason Chen holding the prototype iPhone the gadget blog acquired for $5,000. Gizmodo

"What we were looking at was possession of stolen property and whether the evidence supported extortion," Wagstaffe said. "You can say we were looking at whether their actions supported that they participated in the theft of the phone. We didn't think it supported either."

Wagstaffe said, however, that his office's review of the computers seized from Chen's home showed the correspondence between Gizmodo editors was "juvenile."

"It was obvious that they were angry with the company about not being invited to some press conference or some big Apple event. We expected to see a certain amount of professionalism--this is like 15-year-old children talking," Wagstaffe said. "There was so much animosity, and they were very critical of Apple. They talked about having Apple right where they wanted them and they were really going to show them."

Thomas Nolan, Chen's defense attorney, did not respond to a request for comment. After prosecutors announced in August that they would not be filing charges, Gizmodo's parent company, Gawker Media, published a statement saying that "we are glad that we can finally put this matter behind us."

Wagstaffe's reference to extortion was echoed last year by then-Apple chief executive Steve Jobs, who died on October 5 after struggling against pancreatic cancer. At a conference in June 2010, Jobs suggested that Gizmodo tried to "extort" Apple.

That exchange came to light after a move by CNET and other news organizations to unseal court records. They revealed an e-mail exchange between Jobs and Gizmodo editors in which the gadget blog listed conditions to be met before they would hand the prototype back to Apple. Gizmodo editor Brian Lam also implied that he wanted better access to Apple products in the future: "Apple PR has been cold to us lately. It affected my ability to do my job right at iPad-launch."

Lam said in an article last month that he later apologized to Jobs, but didn't regret paying for the story: "I will not regret things professionally. The scoop was big. People loved it. If I could do it again, I'd do the first story about the phone again." (Lam said in June that he was leaving Gizmodo; Chen is now managing editor at Lifehacker, another Gawker Media property.)

"If I were prosecuting, I'd go after [any blogger who bought the phone] vigorously," Michael Cardoza, a prominent San Francisco defense attorney and former prosecutor, said last year. "I'd fight them tooth and nail to see that they wouldn't get protection under the shield law. I'd play hardball in this case. They didn't find the phone as part of their reporting but instead bought property that they knew or should have known wasn't the property of the seller."

Apple CEO Steve Jobs said last year that his company was "extorted." Asa Mathat/All Things Digital

Another reason why prosecutors may not have wanted to pursue criminal charges against Gizmodo: allegations that the raid, conducted with a search warrant, on Chen's home was illegal. The Reporters Committee for Freedom of the Press and other groups have argued that the raid violated federal and state law.

Federal and state law generally provides journalists, even gadget bloggers, with substantial protections by curbing searches of their employees' workspaces. The 1980 Privacy Protection Act says, in general, it is unlawful for state, local, or federal police to search newsrooms.

Congress enacted the PPA after police obtained a warrant to search the Stanford Daily's newsroom for photographs of a clash between protesters and police, and the U.S. Supreme Court concluded that the search was constitutional. The purpose was, in that heady post-Watergate era, to force the use of less intrusive subpoenas instead of search warrants--while allowing searches in which journalists were the ones suspected of the crime.

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.

The story began last March, when Gray Powell, a 27-year-old Apple computer engineer, forgot an iPhone 4 prototype at a German beer garden in Redwood City, Calif., after a night of drinking. Brian Hogan and Sage Wallower were accused of approaching multiple tech news sites before finally selling the device to Gizmodo for $5,000.

On April 23, 2010, just hours after CNET reported that Apple had contacted law enforcement officials about the phone and an investigation was under way, police showed up at Chen's home across the bay from San Francisco and Cupertino. After breaking down his door, they confiscated three Apple laptops, a Samsung digital camera, a 32GB Apple iPad, a 16GB iPhone, and other electronic gear.

This case is separate from an investigation involving another unreleased iPhone. CNET reported in August that an employee lost control of another unreleased iPhone at Cava22, a Mexican-themed establishment in the city's Mission District, and Apple security tracked it to a nearby home but did not find it.