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Issues To Consider From The Qualcomm Enforcement Action


This prior post went in-depth as to the recent $7.5 million Qualcomm Foreign Corrupt Practices Act enforcement action based on alleged improper hiring and other practices in China.

This post continues the analysis by highlighting various issues to consider.


Qualcomm’s FCPA scrutiny was, at least partially, related to September 2010 formal order of private investigation from the SEC that arose from a “whistleblower’s” allegations made in December 2009 to the audit committee of the Company’s  Board of Directors and to the SEC. As Qualcomm previously disclosed, “the audit committee completed an internal review of the allegations with the assistance of independent counsel and independent forensic accountants. This internal review into the whistleblower’s allegations and related accounting practices did not identify any errors in the Company’s financial statements.”

More directly related to the FCPA scrutiny, according to Qualcomm’s previous disclosures: “On January 27, 2012, the Company learned that the U.S. Attorney’s Office for the Southern District of California/DOJ has begun a preliminary investigation regarding the Company’s compliance with the Foreign Corrupt Practices Act (FCPA), a topic about which the SEC is also inquiring.”

Thus, from start to finish Qualcomm’s FCPA scrutiny lasted between 4-6 years (depending on one’s interpretation of the above disclosures).

If the SEC wants the public to have confidence in its FCPA enforcement program, it must resolve instances of FCPA scrutiny much quicker. Whether its nearly 6 years or merely 4 years, this long time period is simply inexcusable.

Related to this, and further proof that statute of limitations have little relevance in corporate FCPA enforcement actions because cooperation is the name of the game, many of the allegations in the Qualcomm matter go back to 2002 as well as the 2008 Summer Olympics.

As Paul Pelletier rightly described in this recent FCPA Flash podcast, such stale allegations (in this case 8-14 years prior to the actual enforcement action) serve little practical law enforcement value.

Part of the Princeling Probe?

Some commentators seem to be implicitly suggesting that the Qualcomm enforcement action is connected to the ongoing investigations of various financial services companies for hiring so-called China princelings.

However, the Qualcomm enforcement is not related to these probes as should be clear from the above disclosures.

Indeed, while the Qualcomm enforcement action did involve allegations of alleged improper hiring and internship practices in China, such allegations of improper hiring are not as rare as many people think.

For instance, as highlighted in this prior post concerning JPMorgan’s FCPA scrutiny, several FCPA enforcement actions have been based, at least in part, on allegations about the hiring of children or spouses of alleged “foreign officials.” (For additional information, see this prior post titled “Regarding Princelings and Family Members.”)

Compare / Contrast to BNY Mellon

Notwithstanding the fact that several prior FCPA enforcement actions have been based, at least in part, on hiring allegations, it is true that the Qualcomm action is only the second FCPA enforcement (besides BNY Mellon – see here for the prior post) based principally on hiring allegations.

As such, it is worth comparing and contrasting the specifics.

BNY Mellon, as part of the overall $14.8 million settlement amount, paid $9.8 million in disgorgement and prejudgment interest.

On the other hand, Qualcomm’s $7.5 million settlement amount consisted entirely of a civil monetary penalty.

Close Read of the SEC’s Order

The Qualcomm enforcement action involved not only hiring allegations, but also allegations that the company “provided frequent meals, gifts and entertainment to foreign officials.”

However, a close read of the SEC’s order indicates that the FCPA’s anti-bribery violations were premised only on the hiring allegations.  In pertinent part, the SEC’s order states:

“Qualcomm violated [the anti-bribery provisions] by providing employment and internships to relatives of foreign officials in order to assist Qualcomm in retaining and obtaining business. Qualcomm also violated [the internal controls provisions] by failing to devise and maintain a sufficient system of internal accounting controls to prevent the provision of travel, gifts, and entertainment to foreign officials without prior pre-approval and to ensure all things of value given to foreign officials were properly recorded. As a result of this same conduct, Qualcomm failed to make and keep accurate books and records.”

“Amid Increasing Competition”

Perhaps in an effort to “beef-up” its “obtain or retain business” findings, the SEC’s administrative order contains, compared to the norm, an unusually detailed background section regarding the business environment in China at the time of the alleged improper conduct.

Indeed, the SEC’s press release specifically states: “Qualcomm has agreed to pay $7.5 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) by hiring relatives of Chinese government officials deciding whether to select the company’s mobile technology products amid increasing competition in the international telecommunications market.” (emphasis added).

Isn’t It Ironic?

Cue up that most excellent Alanis Morissette song.

The U.S. government found that Qualcomm violated the Foreign Corrupt Practices Act by principally hiring relatives of Chinese officials.

Isn’t it ironic, don’t you think, that the same company has donated generously to the Clinton foundation and in 2014 paid Hillary Clinton $335,000 to give a speech at Qualcomm’s corporate headquarters.

And you wonder why the U.S. is not in the top tier of nations according to Transparency International’s Corruption Perceptive Index.

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