Four charged with tricking Qualcomm into buying $150m startup

Technically the chip giant already owned the tech due to real inventor’s contract, according to DoJ

Updated The US Department of Justice has charged four people with conspiring to fraudulently sell a startup for $150 million to a San Diego based multinational tech company that The Reg has identified as Qualcomm.

The DoJ claims this was despite the fledgling company's supposedly proprietary tech having been developed by Qualcomm staff, and allegedly aided by inside access to Qualcomm.

The indictment claims that Qualcomm's now ex-vice president of research and development Karim Arabi created new microchip technology unbeknownst to his then main employer in 2015. Meanwhile, it goes on to allege, another former Qualcomm vice president, Akbar Shokouhi, helped fund and support the development of a resultant business, Abreezio LLC, via three different entities he controlled.

Under Arabi's contract, the indictment says, "he was bound by agreements generally providing that intellectual property he created during his period of employment would belong to" his employer, Qualcomm.

The intellectual property Abreezio is said to have developed includes "IP and EDA tools focused on PPA optimization in advanced technology nodes," according to the Linkedin bio of a company exec.

The indictment alleges that some Qualcomm VPs, along with Abreezio's appointed CEO Sanjiv Taneja, obscured Arabi's role in developing the tech due to provisions in his contract that stated inventions made during employment belonged to Qualcomm.

Instead, the group marketed the invention as being the brainchild of a Canadian graduate student, Sheida Alan, and the company as an angel-funded Silicon Valley-based design IP startup.

The Canadian-grad-student-Angel-investor narrative was marketed to Qualcomm to entice them to purchase Abreezio, the DoJ claims.

But according to the indictment, unsealed on 9 August, Alan was Arabi's "younger sister."

Court documents allege Arabi was the one who filed the provisional patents under Alan's name, and was secretly involved in most Abreezio matters, even choosing the company name.

The crew sought to hide his involvement, using sham email accounts and even having Arabi impersonate his sister, the indictment alleges.

Meanwhile, the company relied on Arabi to provide intel on Qualcomm, allege prosecutors. Court documents allege Teneja asked Arabi for insight on comparable technology to better market Abreezio.

In October 2015, Abreezio was acquired by Qualcomm for $150 million, with Qualcomm under the assumption all parties involved with the technology had been disclosed. The DoJ says Alan received almost $92 million, Taneja took over $10 million and two of Shokouhi's entities received $24 million.

According to the indictment, the defendants laundered the money through foreign real estate and interest-free loans.

On Tuesday August 9, charges were unsealed against Alan, Arabi, Taneja and Shokouhi. All but Alan were arrested. Alan awaits extradition proceedings from Canada. A superseding indictment [PDF] charges the lot with fraud and money laundering offenses.

Shokouhi pled not guilty later that day. The pleas of the other defendants have not yet been registered.

The defendants face up to 20 years in jail and fines of $250,000 or twice the pecuniary gain/loss for the fraud charges or $500,000 for the money laundering charges. They also must forfeit property derived from the fraud.

The Register has asked Qualcomm for its response and will update accordingly. ®

Updated at 23:20 UTC August 11th Qualcomm has sent the following statement.

"Protecting intellectual property is a cornerstone of innovation. We thank the U.S. Department of Justice for its work in this case."

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