California-based Qualcomm, Inc. is facing a derivative lawsuit filed by one of its shareholders for allegedly turning a blind eye to the company’s weakening sales and a Foreign Corrupt Practices Act (FCPA) investigation.
The lawsuit accuses company CEO, Steven Mollenkopf, and the rest of the board and top executives of being overly optimistic regarding the status of the company. Qualcomm shares took a hit after allegations of an investigation of bribery of Chinese officials came to light – shares dropped from approximately $71 per share in January 2015 to roughly $45 a year later.
In addition, last month, Qualcomm informed investors that $100 million in revenue was being deferred after LG Electronics Inc. took the company to arbitration over previous royalty overpayments and future royalty rates.
Qualcomm’s troubles began earlier, however, as a failure to maintain a proper system of controls led the U.S. Department of Justice to launch an investigation in 2012 and a spate of civil suits followed. An internal review revealed that as much as $250,000 in gifts or benefits were provided to several individuals associated with Chinese companies. In April 2014, the SEC recommended a civil suit be filed against Qualcomm for violations of the anti-bribery provisions of the FCPA.
The case currently is pending in California federal court.
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