SEC: Qualcomm hired relatives of Chinese officials to seal biz deals

Coughs up $7.5m to make this episode go away – and emits best corporate-speak of 2016

Qualcomm has coughed up some cash after it was accused of bribing Chinese officials by giving their relatives plum jobs.

The California chip designer today settled out of court with US financial watchdog the SEC for $7.5m. The deal ends an embarrassing investigation into claims the company broke the Foreign Corrupt Practices Act. To put that payout into context, Qualcomm banked $1.5bn in profit from sales of $5.8bn in the three months to January 28.

Qualy allegedly offered jobs to the families of Chinese government officials to grease the wheels of commerce in the Middle Kingdom. Qualcomm ultimately wanted state-owned telecom companies to use its technology, and thus showered gifts, nights out, jobs and vacations on mandarins and their families, said the SEC. This apparently went on for more than 10 years.

After an official's son was put forward for an interview at Qualcomm and rejected by staffers for being totally unqualified, a HR director pushed for the young man's hiring with the following delicious line of corporatese. According to the SEC, the exec wrote:

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 operating under a different paradigm here than a normal decision tree. I urge you, I beg you, to use that in a workplace situation. Did you throw the office backup tapes in a skip last night because you wanted to make room for more Games Workshop miniatures? Or maybe at home – did you run over the neighbor's dog, repeatedly, because the liquor store closed before you could buy more Four Loko?

You were operating under a different paradigm than a normal yes/no decision tree.

Here's the SEC's rundown of Qualcomm's alleged bungs:

  • Qualcomm offered and provided full-time employment and paid internships to foreign officials’ family members internally referred to as “must place” or “special” hires in order to try to obtain or retain business in China.
  • One official asked Qualcomm employees to find an internship for her daughter studying in the US and the company obliged, acknowledging in internal communications that her parents “gave us great help for Q.C. new business development.”
  • Another intern was hired by Qualcomm at the request of a director general of a Chinese agency. Human resources department emails described the intern as “a MUST PLACE” and described the hiring as “quite important from a customer relationship perspective.”
  • Qualcomm provided a $75,000 research grant to a US university on behalf of the son of a foreign official so he could retain his position in its PhD program and renew his student visa. Qualcomm also provided him an internship and later permanent employment, and sent him on a business trip to China (during which he visited his parents over the Chinese New Year) 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.” Those who interviewed him agreed “he would be a drain on teams he would join.” 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.
  • Qualcomm also provided frequent meals, gifts, and entertainment with no valid business purpose to foreign officials to try to influence their decisions, such as airplane tickets for their children, event tickets and sightseeing for their spouses, and luxury goods.

San Diego-based Qualcomm said it now scrutinizes job candidates to find out if they have a relationship with a state-run organization.

“Companies must effectively design and implement internal controls across all business operations to prevent Foreign Corrupt Practices Act violations, including its hiring practices,” said Michele Wein Layne, director of the SEC’s Los Angeles regional office.

“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.”

The Snapdragon and LTE modem designer has not admitted any wrongdoing as part of the settlement. As well as coughing up some cash, Qualcomm will also submit to the SEC annual reports of its compliance with the Foreign Corrupt Practices Act for the next two years.

"Qualcomm is pleased to have put this matter behind us. We remain committed to ethical conduct and compliance with all laws and regulations, and will continue to be vigilant about FCPA compliance," said Don Rosenberg, the company's general counsel.

Car crash

Last year, Qualcomm paid out about $1bn to end an antitrust probe in China after a long row over chip royalty payments. With regulators similarly upset in the US, Europe and Taiwan over its business practices, amid the announcement of a joint-venture with the government of China's Guizhou Province, these days Qualcomm is looking less like a semiconductor company and more like a US state department negotiator. ®

Narrower topics

Other stories you might like

  • Musk repeats threat to end $46.5bn Twitter deal – with lawyers, not just tweets
    Right as Texas AG sticks his oar in

    Elon Musk is prepared to terminate his takeover of Twitter, reiterating his claim that the social media biz is covering up the number of spam and fake bot accounts on the site, lawyers representing the Tesla CEO said on Monday.

    Musk offered to acquire Twitter for $54.20 per share in an all-cash deal worth over $44 billion in April. Twitter's board members resisted his attempt to take the company private but eventually accepted the deal. Musk then sold $8.4 billion worth of his Tesla shares, secured another $7.14 billion from investors to try and collect the $21 billion he promised to front himself. Tesla's stock price has been falling since this saga began while Twitter shares gained and then tailed downward.

    Morgan Stanley, Bank of America, Barclays, and others promised to loan the remaining $25.5 billion from via debt financing. The takeover appeared imminent as rumors swirled over how Musk wanted to make Twitter profitable and take it public again in a future IPO. But the tech billionaire got cold feet and started backing away from the deal last month, claiming it couldn't go forward unless Twitter proved fake accounts make up less than five per cent of all users – a stat Twitter claimed and Musk believes is higher.

    Continue reading
  • SEC probes Musk for not properly disclosing Twitter stake
    Meanwhile, social network's board rejects resignation of one its directors

    America's financial watchdog is investigating whether Elon Musk adequately disclosed his purchase of Twitter shares last month, just as his bid to take over the social media company hangs in the balance. 

    A letter [PDF] from the SEC addressed to the tech billionaire said he "[did] not appear" to have filed the proper form detailing his 9.2 percent stake in Twitter "required 10 days from the date of acquisition," and asked him to provide more information. Musk's shares made him one of Twitter's largest shareholders. The letter is dated April 4, and was shared this week by the regulator.

    Musk quickly moved to try and buy the whole company outright in a deal initially worth over $44 billion. Musk sold a chunk of his shares in Tesla worth $8.4 billion and bagged another $7.14 billion from investors to help finance the $21 billion he promised to put forward for the deal. The remaining $25.5 billion bill was secured via debt financing by Morgan Stanley, Bank of America, Barclays, and others. But the takeover is not going smoothly.

    Continue reading
  • Ryzen shines with remote management on Qualcomm Wi-Fi kit
    Working to compete with Intel as FastConnect comes to AMD-processor-powered PCs

    AMD and Qualcomm have rolled out a joint effort that brings remote management capabilities over Wi-Fi for AMD business systems, potentially boosting their appeal for corporate IT departments.

    The two companies said they were working together to improve Qualcomm's FastConnect wireless kit for AMD compute platforms based on the Ryzen chips for desktops and laptops. The starting point for this is AMD Ryzen-powered business laptops using Qualcomm's FastConnect 6900 system that delivers Wi-Fi 6 and 6E plus Bluetooth 5.3, supporting Wi-Fi connection speeds up to 3.6Gbps.

    Remote management is enabled by the combination of the AMD Manageability Processor now embedded in Ryzen PRO 6000 systems and the FastConnect 6900 system, AMD and Qualcomm said, with support for the DASH client management standard developed by the Distributed Management Task Force (DMTF).

    Continue reading

Biting the hand that feeds IT © 1998–2022