According to CNN.com (via Mashable.com), secret documents leaked to Boy Genius Report blog confirms that Apple knows its new iPhone 4 has a critical design flaw.

The documents describe the “strong company line” that AppleCare representatives are being trained to tell consumers who complain about the new phone’s reception problems:

Employees are told to say that the device’s reception performance “is the best we have ever shipped” and that its critical antenna flaws are “a fact of life in the wireless world.” They are told not to perform service on iPhones with these problems and instead to give customers a PR-driven recitative instead.

In a nutshell, Apple knows the phone has problems but will insist that users are simply “holding it wrong.”

These statements are dead ringers for CEO Steve Jobs’ own assertions that the iPhone 4 antenna and reception issues do not, in fact, exist. “There is no reception issue,” he told one user. But the very fact that this document exists suggests that Apple execs know there is indeed a widespread hardware flaw, even if they’re unwilling to address it publicly at this time.

CNN’s newsroom staff were able to duplicate the reception issues with their own iPhone 4’s: “When held by its sides, which are composed of a metal antenna band, the phone’s reception quality drops dramatically.”

According to CNN, one law firm is preparing a class action lawsuit against Apple and is soliciting iPhone 4 customers to contact them about reception issues.

While the leaked documents acknowledges the fact that a rubber bumper case would improve reception on the iPhone 4’s, AppleCare reps are instructed not to offer the bumpers to customers:

2. Do not perform warranty service. Use the positioning above for any customer questions or concerns.

5. We ARE NOT appeasing customers with free bumpers — DON’T promise a free bumper to customers. Read More…

Wow, I wonder how Apple customers feel now after standing in line for hours to get that phone?