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Report: Qualcomm paid $975,000 to China anti-trust official for ‘consulting fees’

China’s State Council has fired one of its senior advisors for allegedly helping Qualcomm Inc. in an anti-trust probe in exchange for $975,000 in consulting fees.
Zhang Xinzhu (pictured), a researcher at the Chinese Academy of Social Sciences and an advisor to the State Council’s Anti-Monopoly Commission, was fired on August 12 for “violating work discipline,” according to a report Monday by the China Compliance Digest.

Zhang told the media he was fired because of “speaking for foreign firms.”

Qualcomm received a Wells Notice on March 13 this year from the SEC's Los Angeles Regional Office that recommended an enforcement action against the company for bribery in China.

The bribery allegations and subsequent SEC investigation started in 2012 after a whistleblower complaint.

Sources said Qualcomm hired Zhang without approval from the State Council. Qualcomm allegedly paid him $975,000 for his assistance in providing a report to China’s National Development and Reform Commission (NDRC) to show that the company didn’t engage in monopolistic practices, the China Compliance Digest said.

The FCPA prohibits corrupt payments to foreign officials for the purpose of obtaining or retaining business or gaining an unfair advantage.

Payments to an anti-trust regulator intended to win a favorable government decision in a monopoly investigation could violate the FCPA's antibribery provisions.

Qualcomm said it didn’t pay Zhang directly because the report was done by Global Economics Group LLC and co-authored by Zhang. The fee was paid to Global Economics for its services. Zhang also denied accepting the payment, the report said.

The NDRC has been investigating the U.S. chipmaker since November last year for alleged overcharging and abusing its market position.

In an SEC disclosure in April this year, Qualcomm said it had discovered "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 it believed the total value "of the benefits in question to be less than $250,000, excluding employment compensation."


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.