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By Yin Wilczek
Qualcomm Inc.’s board June 16 dodged a shareholder lawsuit alleging it consciously ignored warning signs that the company wasn’t complying with U.S. antibribery laws in China and Korea ( In re Qualcomm Inc. FCPA Stockholder Derivative Litig. , 2017 BL 205022, Del. Ch., No. 11152-VCMR, 6/16/17 ).
The shareholders’ complaint referred to Qualcomm’s $7.5 million settlement with the Securities and Exchange Commission in 2016 to resolve claims that it violated the Foreign Corrupt Practices Act by, among other actions, hiring the children of Chinese government officials deciding whether to select its mobile technology products.
The company settled the SEC’s allegations without admitting or denying wrongdoing.
The Delaware Chancery Court, in granting the Qualcomm board’s motion to dismiss, found that the shareholders failed to plead facts showing that the directors acted in bad faith. In fact, the complaint included remedial actions planned by the board, Vice Chancellor Tamika Montgomery-Reeves wrote.
The court also clarified that violation of the FCPA, in itself, doesn’t support director liability under Delaware law. “Delaware law, not the FCPA, establishes the standard for director liability, and under Delaware law, Plaintiffs’ Complaint does not allege bad faith,” it said.
2016 is the biggest enforcement year for the foreign bribery statute so far. Last year, 27 companies paid about $2.5 billion to resolve FCPA allegations.
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