Apple investigating $43 million rejected parts fraud carried out at its Foxconn plant

iPhone battery Source: iMore

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Apple is reportedly investigating a fraudulent scheme that used rejected iPhone parts to create working phones that were sold on to buyers.
The report suggests that a Taiwanese businessman worked with management staff at Foxconn's Zhengzhou facility.
The parts should have been destroyed but were instead assembled and sold in iPhones to the tune of $43 million over three years.

Apple is reportedly investigating claims that a Taiwanese businessman and management staff at Foxconn's Zhengzhou facility operated a fraudulent scheme to sell iPhones assembled from rejected parts.

According to Taiwan News via 9to5Mac:

Taiwanese electronics manufacturer Foxconn said on Wednesday (Dec. 18) that an investigation has been launched into an alleged fraud in which employees sold iPhones with defective components.

A Taiwanese businessman has purportedly worked with a group of management staff at Foxconn's Zhengzhou facility to obtain and assemble flawed iPhone parts, which are then sold under the guise of iPhone products manufactured at the Chinese production base.

The defective components would have been destroyed according to normal procedures. The businessman and his crime ring have made a fortune out of the illegal dealings, allegedly raking in NT$1.3 billion (US$43 million) over the past three years...

As 9to5Mac notes, whilst the specifics aren't clear, it seems that the management team responsible for the disposal of defective parts actually sold them to a crime ring, where they were assembled to create working iPhones that were sold on to buyers.

According to a local report, a whistleblower emailed Tim Cook to report the fraud, which is now being investigated by Apple's Business Assurance & Audit Team. Taiwan News reports that Apple released a statement saying that steps had been taken to address the issue, including an internal investigation. Reports also suggest that Foxconn's former chairman Terry Guo has said that in a company with more than 1 million employees, it would be unsurprising that "unreasonable things may happen to one or two workers".

Whilst Apple has previously been a victim to fraud in the past, none match the purported scale of this operation. If the alleged activity is found to be based in truth, it would be a massive turn up for the books, and someone will probably go to jail for quite a long time...