Something’s rotten in the technology industry, and the U.S. Securities & Exchange Commission is trying to root it out.

In December, the SEC brought fraud charges against mid-level executives at Flextronics International Ltd., Advanced Micro Devices Inc., Taiwan Semiconductor Manufacturing Company and Dell. These men had been “consulting” part-time over the last two to three years for expert network firm Primary Global Research LLC. The four were allegedly paid more than $400,000 to participate in calls with Wall Street hedge firms and traders — calls that it turns out the Federal Bureau of Investigation had wire-tapped.

The SEC complaint charges that these managers shared material non-public information about their companies, and it includes quotes from transcripts of the taped calls to illustrate. In an October 2009 call, for example, a Flextronics senior director of business development tells a trader that Apple is coming out in the spring with a new iPhone (presumably the iPhone 4) that will include two cameras, a five megapixel auto-focus camera, and a VGA forward-facing video conferencing camera. He also reveals that Flextronics expects to start building the new phone in March. (The iPhone 4 started shipping in June.)

A Dec. 20 Wall Street Journal article says that this is just “the first major shoe to drop” in a three-year investigation. The investigators seem to be following a trail that began with the insider trading charges filed against the Galleon Group and its founder Raj Rajaratnam in late 2009. Former AMD Chairman Hector Ruiz has been tied to the Galleon investigation, although he has not been charged with any wrongdoing. Former high-level IBM executive Robert W. Moffat Jr., however, pleaded guilty to leaking inside information about IBM, Lenovo and Advanced Micro Devices in the Galleon case. Last fall he was sentenced to six months in jail. In the charges filed last month against the tech executives, the SEC describes a secret witness, “an individual who had substantial experience evaluating public companies in the semiconductor and technology industries.” The WSJ story identified that witness as Karl Motey, a technology analyst who had a business connection with a hedge-fund manager charged in the Galleon case.

One of the WSJ’s sources said that Motey made calls, presumably as a client of Primary Global, to corporate managers at more than 60 companies, gathering evidence for the government. It won’t surprise me if all 60 of those tech companies are eventually implicated. The growing scandal reflects the continuing cozy relationship between the tech industry and Wall Street. Over the course of my 25-year career reporting on this business, I’ve often been amazed by how chummy the two groups are. In tech, where so much of salary and compensation rides on initial public offerings and stock options, and where much of a company’s financial success depends on the technology the company is bringing to the market, these relationships may be a natural outgrowth. But, perhaps because so many tech companies grew out of the Silicon Valley’s venture capital culture – in which inside information is not criminal, but rather, the stock in trade (pun intended) of the business – there seems to be widespread nonchalance, even disregard, of SEC regulations designed to protect the interests of ordinary investors.

Every few years, it seems the SEC makes a run at reining in the abuses at tech companies. Five years ago, for example, it investigated a bunch of tech companies – including Analog Devices, Broadcom and Apple – for allegedly backdating stock options. Apparently, many companies routinely changed the date on which their boards approved stock options, moving it from the real date to an earlier date so that the options would benefit from a recent rise in the stock price. Companies are still dealing with the legal fallout from that scandal.

It will be interesting to see who else the SEC catches in this latest net. Indeed, just a few days ago, Reuters reported that court documents recently filed in the Galleon case named a former senior marketing director at Akamai Technologies Inc. as a source who allegedly provided inside information to a trader. Will all this lead to changes in tech industry practices? Unless dozens of high-profile execs get charged, convicted, and sent to jail, history indicates that the odds are against it.

(For more details on the individuals involved and the information they shared, read my blog post on EBN Online.)