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Former Qualcomm Exec Accused of Insider Trading

Federal probes that uncovered evidence of an alledged insider stock trading scheme leading to the indictment last week of a former top Qualcomm Inc. executive also included an investigation into the company itself, according to the San Diego company’s securities filings.

On Sept. 23, the U.S. Attorney’s Office brought charges against Qualcomm’s former president of global business operations, Jing Wang; his brother Bing Wang; and Jing Wang’s stock broker, Gary Yin.

The charges covered securities fraud, money laundering and obstruction, and focus on Jing Wang’s alleged use of confidential information obtained as an executive to buy and sell stock of Qualcomm and that of a company Qualcomm acquired, Atheros Communications. Wang is accused of profiting from the stock trades by nearly $250,000, the indictment said.

Yin pleaded guilty to a single felony count Sept. 24 and faces a maximum sentence of five years in prison when he is sentenced in December. Jing Wang pleaded not guilty and has been released on a $3 million bond, and is confined to his Del Mar home until the next court date, federal prosecutors said.

An arrest warrant for Wang’s older brother, Bing, a resident of Anhui Province in China, was issued.

Jing Wang’s attorney, Brian Hennigan, declined to comment on the case except to say that he entered a plea of not guilty and was awaiting the discovery of evidence prosecutors must present before proceeding. He said Wang has been a U.S. resident since the late 1980s.

Whistleblower Prompted Investigation

In a short response to questions about Wang, Qualcomm said he joined the company in 2001 and resigned in May, after he took a leave of absence starting in May 2012.

“This is an individual matter involving Mr. Wang, who is no longer employed by Qualcomm (Nasdaq: QCOM), and this matter will be addressed through the legal system,” spokeswoman Christine Trimble said.

Nevertheless, prosecutors revealed in the federal indictment of the trio that Qualcomm itself was the subject of an investigation by the Securities and Exchange Commission in July 2010 after a whistleblower’s allegations in December 2009 concerning the company’s accounting practices.

According to the recent indictment, “By April 2011, the SEC’s investigation had expanded into potential violations of the Foreign Corrupt Practices Act.”

Qualcomm stated in its July 2011 quarterly filing that it completed an internal review of the whistleblower’s allegations with the help of an outside forensic accountant and uncovered no errors in the financial statements.

In January, Qualcomm said in its quarterly financial report that it learned in January 2012 the U.S. Attorney’s Office in San Diego had begun a preliminary investigation regarding the company’s compliance with the FCPA, the anti-bribery law.

“The company believes that FCPA compliance had also become a focus of the SEC investigation,” the company’s filing states. “The company has discovered, and as part of its ongoing cooperation with these investigations has informed the SEC and the [Department of Justice] of, instances in which special hiring consideration, gifts or other benefits were provided to several individuals associated with Chinese state-owned companies or agencies.”

Qualcomm said in the filing it believed the value of the benefits to be less than $250,000, excluding employment compensation.

Qualcomm did not respond to additional questions about the status of the current federal probes into FCPA compliance.

Use of Confidential Information Alleged

According to the indictment, Jing Wang was trained as a lawyer in China, obtained a master’s degree in law from the University of Virginia School of Law and worked for several years at a law firm in Washington, D.C.

In 2008, Wang was promoted to senior vice president and joined Qualcomm’s executive committee. It was through that affiliation that Wang was granted access to internal decisions by its board.

Wang used Yin, prosecutors allege, to set up brokerage accounts through Merrill Lynch using a shell company called Unicorn Global Enterprises Ltd. registered in the British Virgin Islands. Bing Wang was the registered owner of the account.

The indictment alleges that Jing Wang used confidential information disclosed in high-level Qualcomm meetings to buy stock in three transactions from 2010 to 2011.

One of those stock purchases was made before Qualcomm publicly announced its $3.1 billion acquisition of Atheros. Wang directed Yin to take all of the funds in Unicorn before the news was announced and buy Atheros shares, prosecutors allege. Once the news was released those shares jumped about 20 percent.

Wang later told Yin to sell all the Atheros stock and buy Qualcomm stock before Qualcomm announced record financial results for first quarter 2011, the indictment states.

After that news was released, Qualcomm shares increased by about $4 per share.

As Jing Wang became aware of the federal investigation into the stock trades involving Qualcomm shares, he ordered Yin to transfer about $525,000 in the Unicorn account to new account Yin set up using the forged signature of Wang’s mother as the owner, the indictment states.

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