Risk & Compliance

Qualcomm Tried to Influence Chinese Officials: SEC

Qualcomm "went to extraordinary lengths" to get officials at government-owned telecom companies to buy its products, according to an SEC settlement.
Katie Kuehner-HebertMarch 1, 2016

Qualcomm has agreed to pay the Securities and Exchange Commission $7.5 million to settle charges that it violated the Foreign Corrupt Practices Act by hiring relatives of Chinese government officials who were deciding whether to select the company’s mobile technology products, the agency said Tuesday.

The San Diego semiconductor manufacturer also provided gifts, travel, and entertainment to try to influence officials at government-owned telecom companies in China, according to the SEC. With insufficient internal controls to detect improper payments, Qualcomm misrepresented in its books and records that the things of value provided to foreign officials were legitimate business expenses, the SEC said.

“For more than a decade, Qualcomm went to extraordinary lengths to gain a business advantage with foreign officials deciding between Qualcomm’s technology and its competitors’,” Michele Wein Layne, director of the SEC’s Los Angeles regional office, said in a press release.

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According to the SEC’s order instituting a settled administrative proceeding, among other actions Qualcomm provided a $75,000 research grant to a U.S. university on behalf of the son of a foreign official so the official’s son could retain his position in its doctoral program and renew his student visa. Qualcomm also provided the son an internship and later permanent employment, and sent him on a business trip to China, despite concerns expressed about his qualifications for the assignment.

The son’s initial interview for permanent employment resulted in a “no hire” decision because he was not “a skills match” and did not “meet the minimum requirements for moving forward with an offer,” according to the SEC.  Those who interviewed him agreed “he would be a drain on teams he would join.”

Nevertheless, a human resources director still advocated for the hire, writing, “I know this is a pain, but I think we’re operating under a different paradigm here than a normal ‘hire’/‘no hire’ decision tree. We’re telling this kid … we don’t want to waste time or extend any extra effort in this favor [the telecom company] has asked of Qualcomm, and then turn around and ask the same person we just rejected to do us a special favor.”

Besides the preferential job treatment, a Qualcomm executive personally provided the official’s son with a $70,000 loan to buy a home, according to the SEC.

The SEC’s order found that Qualcomm violated the anti-bribery, internal controls, and books-and-records provisions of the Securities Exchange Act of 1934. Qualcomm neither admitted nor denied the findings.