Qualcomm has settled charges with the U.S. Securities and Exchange Commission that it hired relatives of Chinese officials who could influence the selection of its mobile technology products in a competitive market.
The SEC investigation also found that Qualcomm allegedly provided “gifts, travel, and entertainment” to try to influence officials at government-owned telecom companies in China. Qualcomm misrepresented in its books and records that the things of value provided to the officials were legitimate business expenses, the SEC said.
The chip company neither accepts nor denies the charges but has agreed to pay US$7.5 million to the SEC to settle charges that it violated the Foreign Corrupt Practices Act (FCPA), according to a statement Tuesday from the agency. Qualcomm clarified that the settlement relates to its conduct before 2012 and the SEC action was not a criminal one. The Department of Justice recently closed its investigation on these matters without taking any action, it added.
The charges against Qualcomm highlight the challenges faced by U.S. companies in various markets where government controls are strong and bribing is considered acceptable. Some financial institutions have also faced probes by the SEC on similar charges relating to their operations in China.
Qualcomm is said to have provided full-time employment and paid internships to officials’ family members with the aim of obtaining or retaining business in China. The company obliged, for example, an official who asked Qualcomm employees to find an internship for her daughter studying in the U.S., acknowledging in internal communications that her parents “gave us great help for Q.C. new business development,” SEC said.
The company is also charged with providing a $75,000 research grant to a university in the U.S. on behalf of the son of a foreign official so that he could retain his position in its Ph.D. program and renew his student visa. The favors extended to this “princeling,” a term often used to refer to the children or younger relatives of top Chinese government and public sector officials, suggests the importance of the official and highlights the extent to which the company was allegedly willing to go to win him over.
The company subsequently hired the official’s son as an intern and later made him a permanent employee and sent him on a business trip to China, an opportunity to visit his parents over the Chinese New Year, although an initial interview for permanent employment resulted in a “no hire” decision because he did not “meet the minimum requirements for moving forward with an offer.” In addition, a Qualcomm executive personally provided the son of the official with a $70,000 loan to buy a home, according to the SEC.
The company said it is “pleased to have put this matter behind us.” It remains “committed to ethical conduct and compliance with all laws and regulations, and will continue to be vigilant about FCPA compliance,” Don Rosenberg, Qualcomm’s executive vice president and general counsel, said in a statement.
Qualcomm has previously had regulatory problems in China. In February last year it said it had agreed to pay a fine of about $975 million as part of a broader settlement with China's National Development and Reform Commission, which was investigating Qualcomm under the country's anti-monopoly law.
The company said earlier this year that it was setting up Guizhou Huaxintong Semi-Conductor Technology, a server chipset design and sales joint venture in which the investment arm of the provincial government of Guizhou would hold a majority stake. Like many other U.S. tech companies, Qualcomm appears to want to take advantage of such partnerships with local companies for easier access to the local market.