Qualcomm's Whistleblower Woes

San Diego-based Qualcomm Incorporated said this week it is under investigation by the SEC and DOJ for FCPA compliance.

Qualcomm learned about the DOJ investigation late last month. It said the U.S. Attorney’s Office for the Southern District of California 'has begun a preliminary investigation regarding the Company’s compliance with the Foreign Corrupt Practices Act.' It didn't identify what business units or countries are involved or the amounts of any alleged sensitive payments.

The SEC began an investigation in September 2010 following a whistleblower complaint a year earlier.

Qualcomm provides wireless technology and services. Revenues last year were about $15 billion. It operates primarily in China, South Korea, Taiwan, Japan, and the United States.

Qualcomm Incorporated trades on NASDAQ under the symbol QCOM.

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The complete FCPA disclosure in Qualcomm's Form 10-Q Quarterly Report filed February 1, 2012 said:

Securities and Exchange Commission (SEC) Formal Order of Private Investigation and Department of Justice (DOJ) Investigation: On September 8, 2010, the Company was notified by the SEC’s Los Angeles Regional office of a formal order of private investigation. The Company understands that the investigation 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. 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. 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. The Company believes that it is in compliance with the requirements of the FCPA and will continue to cooperate with both agencies.

[Updated] Motorola Investigation Launched, Source Reports

An Austrian news weekly reported a few days ago that U.S. enforcement authorities are investigating an Austrian lobbyist and Motorola over alleged bribes to government officials, according to an AFP story.

"From April 2004 onwards, Motorola apparently transferred up to €2.2 million ($3.12 million) to three firms controlled by lobbyist Alfons Mensdorff-Pouilly," the report said.

Motorola's agent, Mensdorff-Pouilly, then allegedly used the money to make "illegal payments" to key political figures in Europe and the Middle East, it said.

Mensdorff-Pouilly, 58, was charged in 2010 by the U.K. Serious Fraud Office in connection with the BAE case. The charges were later dropped. The Austrian aristocrat was reportedly awarded €430,000 in compensation for the week he spent in custody in the U.K.

A German-language Wikipedia entry alleges a possible link between Mensdorff-Pouilly and the Siemens bribery scandal. The prosecutor's office in Vienna, the entry says, examined Mensdorff-Pouilly's 2007 work for Siemens as a consultant for part of a Hungarian truck toll project. He has denied any wrongdoing.

Motorola was in a consortium with Telekom Austria, which was separately accused of other corrupt payments and is the subject of investigations in Austria.

The report said the SEC is investigating Motorola's alleged role.

Motorola Inc., based in Schaumburg, Illinois, changed its name  in January to Motorola Solutions, Inc.

Motorola Solutions, Inc. trades on the NYSE under the symbol MSI.

Our thanks to the reader who sent the link to the story.

U.S. Investigating Indonesia Bribes

Map courtesy of wikipediaAn FBI agent told a gathering of international law enforcement officials last week that several U.S. public companies are being investigated for bribery in Indonesia.

According to a report in the Jakarta Globe, Gary Johnson of the FBI said, “There are cases that involve companies from our country in Indonesia.”

He was interviewed by the Globe during a two-day conference on combating bribery in international business transactions in Nusa Dua, Bali.

Another FBI agent, Gregory A. Coleman, told the paper a memorandum of understanding between the FBI and Indonesia's Corruption Eradication Commission (KPK), showed that the two agencies are pursuing similar goals.

Recent FCPA enforcement actions with allegations of bribery in Indonesia involved Alliance One, a tobacco company, specialty-chemical company Innospec, and communications firm Veraz Networks.

Indonesia, a country spread over "17,508 islands (6,000 inhabited)," according to the CIA World Factbook, has about 250 million people. It ranks 110 on the corruption perception index, tied with Benin, Bolivia, Gabon, Kosovo, and the Solomon Islands.

The country produces about a million barrels of oil a day. Other big industries are textiles, apparel, footwear, mining, cement, chemical fertilizers, plywood, rubber, and food. The tourist industry is also huge.

The FBI agents at the Bali conference wouldn't name the U.S. firms under investigation.

“They are companies that are listed in the U.S. stock market,” Agent Johnson said. The cases are being handled by the legal attaché at the U.S. Embassy in Jakarta in cooperation with the KPK, he said.

Avon's Pricey Looking Glass

In the New York Times' DealBook, Peter Henning had a terrific post about the cost of Avon Products' internal FCPA investigation.

The company's legal fees and costs for outside counsel conducting the investigation were $59 million in 2009, $95 million in 2010, and $22.5 for the first quarter of this year, said Henning, a Wayne State University Law School prof who writes the DealBook's White Collar Watch.

"The final tally for the internal investigation could easily reach $250 million," according to Henning, "a significant expenditure for any company to bear."

After the investigtion, Henning said, Avon is likely to end up paying millions more to settle FCPA claims by the DOJ and SEC.

Henning's conclusion: "While crime does not pay, it sure can be lucrative for law firms."

Q&A On Lindsey Evidence

A thoughtful comment came in from a reader about our post In Lindsey Trial, FBI's handling of grand jury questioned.

The reader said:

Putting aside arguments that CFE may not be the type of entity the FCPA was designed to cover, it would be helpful for the FCPA Blog to provide commentary on the relevance of the points raised during cross-examination. For example, the relevance and importance of (i) the Mexican government entity being a "victim," (ii) the existence of any competition for the government contract in question, (iii) a purported competitor actually competing for the work, and (iv) where all the money in a recipient's bank account came from if it is otherwise firmly established that money was paid to the "foreign official."

April 27, 2011 | Chas Wilkinson (cfwilkinson@ashland.com)

 And our response:

Thanks for your comment.

We wouldn't presume to speak for defense counsel in the Lindsey case.

But the relevance of the points raised in our post goes mainly to the credibility of the government's witness, in this case the FBI's co-case agent for the investigation. Also, the matters raised in our post go to the conduct of the government before the grand juries that indicted the defendants. It is possible that if the grand juries were not provided accurate or complete information on which to base indictment decisions, the trial judge might decide to dismiss some or all of the charges against the defendants or direct an acquittal.

Even if the judge doesn't dismiss the indictments, defense counsel may use the government's behavior at the grand jury proceedings to argue against the credibility of the government's witnesses in the trial. We'll see what happens in the courtroom and what the defense lawyers and the judge do with the information coming out on cross examination of the government's witnesses.

So, for example, the victimhood of CFE isn't itself that relevant in the Lindsey case. But the fact that the investigators / prosecutors didn't talk to CFE until after the indictment perhaps indicates a narrow or shallow investigation that may have gaps in it.

Nestor Moreno's promotion, apparently putting him out of the relevant chain of command at CFE, appears contrary to the government's theory of the case, which is based on his receiving bribes and influencing contract awards during the relevant period.

The fact that there may have been no competitor to Lindsey for the CFE awards also conflicts with the government's theory of the case. If there was no competitor, why would Lindsey need to pay bribes?

And the FBI agent's apparent statement to the grand jury that most of the funds in Grupo's account came from Lindsey when very little did, could be both misleading and potentially prejudicial, going both to the credibility of the government's witness and the propriety and fairness of the grand jury proceeding.

Thanks again for the comment.