AAPL Apple Inc

By Yoko Kubota and Tripp Mickle 

Apple Inc. conducted an investigation in May into possible business misconduct within its supply chain, including possible kickbacks and bribes to employees from suppliers, rattling some of the tech giant's suppliers and staff in China as they geared up to produce the company's newest devices.

In response to The Wall Street Journal's questions, an Apple spokesman said the company found no evidence of bribery or kickbacks, but declined to disclose what prompted the investigation or its findings.

Apple inquired with at least one supplier about possible kickbacks to Apple employees, according to people familiar with the probe.

"We have over 2,300 operations employees in China and, while misconduct issues are rare, we take any allegations very seriously and investigate each one thoroughly," an Apple spokesman said in its statement.

Inside Apple, the supply-management team in China handling nonelectrical components for iPhones experienced some turnover this year. A top procurement executive left in May, and two junior members of the team departed Apple around that time, according to people familiar with the matter. The reasons for their exits aren't clear. Apple declined to comment on the departures.

The companies that were questioned in connection with the probe continue to supply Apple, people familiar with the investigation said. Changing suppliers of key components could disrupt iPhone production.

The probe has been a source of concern for some Apple staff and suppliers amid this year's iPhone cycle, primarily in the segment tied to nonelectrical components, the people said. The company has thousands of suppliers and supply-management employees spread across China and the U.S.

Apple has strict rules for its employees on dealing with suppliers, Apple suppliers and former staff said. Apple employees working on parts procurement cannot accept gifts from suppliers or go out for lavish meals, they said.

It also has strict rules for suppliers. According to its "Supplier Code of Conduct" on the company's website, Apple suppliers "shall not engage in corruption, extortion, embezzlement, or bribery to obtain an unfair or improper advantage."

--Yang Jie in Beijing contributed to this article.

Write to Yoko Kubota at yoko.kubota@wsj.com and Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

November 30, 2018 19:21 ET (00:21 GMT)

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