International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Monday, July 21, 2014

Former Senior Executive of Qualcomm Pleads Guilty to Insider Trading and Money Laundering

Excerpts from Department of Justice Press Releases and SEC Complaint ....

DOJ-U-S-ATTORNEYS-OFFICEJing Wang, 51, the former Executive Vice President and President of Global Business Operations for Qualcomm Inc., today pleaded guilty to insider trading in shares of Qualcomm and Atheros Communications Inc. Wang also pleaded guilty to laundering the proceeds of his insider trading using an offshore shell company.

According to court documents, Wang committed insider trading on three separate occasions over a ten-month period in 2010 and 2011.   In early 2010, Wang purchased approximately $277,739 of Qualcomm stock prior to the company’s unexpected announcement of a dividend increase and stock repurchase program.   In December 2010, while in Hong Kong, Wang purchased Atheros stock hours after Qualcomm’s Board of Directors made a non-public offer to purchase Atheros.   Just a few weeks later, in January 2011, Wang directed his stock broker, Gary Yin, to sell the Atheros stock in a brokerage account held in the name of an offshore entity, Unicorn Global Enterprises, and used the proceeds to purchase Qualcomm stock, one day before Qualcomm announced record earnings results.   In total, Wang illegally gained approximately a quarter of a million dollars from these three illegal transactions.

Wang also pleaded guilty to money laundering resulting from transferring the illegal proceeds in the Unicorn account – over $525,000 – to another nominee brokerage account in the British Virgin Islands for Clearview Resources Ltd.   Wang also admitted in his plea agreement to obstructing justice by conspiring with his brother, Bing Wang, and Yin to fabricate evidence and concoct a false cover story that Bing Wang conducted the illegal stock trades.

Wang was originally indicted in September 2013.   Bing Wang, who is currently believed to reside in China, remains charged and is wanted on an international arrest warrant.   Gary Yin pleaded guilty to conspiring with Jing Wang and Bing Wang to obstruct justice and launder money, and is currently scheduled to be sentenced on Sept. 15, 2014.

Indictment Facts (See also SEC Complaint)

According to the indictment, Jing Wang used his Merrill Lynch broker, Yin, to create an offshore entity, Unicorn Global Enterprises, in the British Virgin Islands and to open a brokerage account for Unicorn at Merrill Lynch.  Jing Wang provided documents to Yin to create the false impression that his brother, Bing Wang, controlled the account, when in fact Jing Wang was the true owner of the account.  This allowed Jing Wang to conceal his true ownership and control of the assets in the account and to avoid reporting to U.S. tax authorities.  Significantly, it also allowed Jing Wang to disguise his involvement secreting tens of thousands of dollars for use in China.

The indictment alleges that after the creation of the Unicorn account, Jing Wang was named an Executive Vice President of Qualcomm and fell within the company’s insider trading restrictions for officers.  As an officer, Wang was exposed to Qualcomm’s confidential business information, and was repeatedly notified that he was not permitted to use material, non-public information to engage in stock transactions.

Among the inside information learned by Jing Wang because of his senior position was the fact that in the first quarter of 2010, Qualcomm was poised to announce an increased quarterly dividend and a stock repurchase program.  On March 1, 2010, Jing Wang allegedly acted on this material, non-public information and directed Yin to purchase as much Qualcomm stock as possible in the Unicorn account before the information became public.  After the close of trading on March 1, 2010, Qualcomm issued a press release announcing the dividend increase and stock repurchase program, and the company’s stock appreciated approximately 10 percent in value.

According to the indictment, Jing Wang next allegedly engaged in insider trading when he learned that Qualcomm was interested in purchasing Atheros.  On Dec. 1, 2010, acting on this information, Jing Wang met with Yin and instructed him to sell all Qualcomm shares in the Unicorn account.  Jing Wang then told Yin to make preparations to purchase Atheros with the funds in the account, but to wait for further confirmation.  Jing Wang’s broker proceeded to liquidate all of the illegally held Qualcomm stock in the Unicorn account, resulting in ill-gotten gains of approximately $94,709 from the earlier insider trading.

On Dec. 6, 2010, while attending a meeting of Qualcomm’s Board of Directors in Hong Kong, Jing Wang learned that the board had authorized Qualcomm to make a non-public offer to purchase Atheros for $45 per share.  Later that same day, Jing Wang allegedly called Yin in San Diego and instructed him to use all available funds in the secret Unicorn account to purchase Atheros stock.  The broker followed Jing Wang’s instructions and purchased 10,800 shares at approximately $34 per share, for a total of $366,766.

Qualcomm’s offer to purchase Atheros remained confidential until an article appeared in the Dealbook section of the New York Times’ website on Jan. 4, 2011, and Qualcomm made an official announcement of the deal on Jan. 5, 2011.  Between the close of trading on Jan. 3, 2011, and the close of trading on Jan. 5, 2011, the price of Atheros stock jumped from approximately $37 to $44.50 – an increase of  approximately 20 percent.

The indictment alleges that Jing Wang engaged in a third incident of insider trading on Jan. 25, 2011, when he learned that Qualcomm was about to release record financial results.  Immediately prior to announcement of those earnings, Jing Wang directed Yin to sell all the Atheros stock in the Unicorn account and purchase Qualcomm stock.  The broker sold all of Jing Wang’s illegally purchased Atheros stock for $44.60 per share, and used all of the proceeds to purchase Qualcomm stock at $50.87 per share.  The following day, after Qualcomm announced the record earnings results, Qualcomm’s stock price increased by approximately $4 per share.  All told, Jing Wang illegally gained approximately a quarter of a million dollars from these three illegal transactions.

The indictment and criminal information further allege that in order to conceal his insider trading, Jing Wang conspired with Yin and his brother, Bing Wang, to conceal Jing Wang’s control of the Unicorn account and his illegal purchases of Qualcomm and Atheros stock.  Yin and Bing Wang agreed to assist Jing Wang, and the three defendants engaged in a number of activities to obstruct any investigation of the trades, as well as to conceal Jing Wang’s control of the Unicorn account.  These obstructive acts included concocting a false cover story that would blame Bing Wang for the illegal trades in Qualcomm and Atheros, concealing Jing Wang’s actual control of the Unicorn account from Merrill Lynch, and transferring the proceeds of Jing Wang’s insider trading to another offshore entity nominally owned by Jing Wang’s mother.

For example, in carrying out the obstruction, the indictment alleges that in January 2012, Jing Wang forged the signature of his mother and used her identification documents to create another British Virgin Islands entity called Clearview Resources Ltd.  At Jing Wang’s instruction, Yin created a Merrill Lynch account for Clearview and attempted to further distance Jing Wang from the transactions by transferring all of the money in the Unicorn account to the Clearview account in a series of structured transactions.

Another example of obstructive conduct alleged in the indictment took place in March 2012, when Jing Wang met with Yin and explained that the SEC was investigating Qualcomm. At that time, Jing Wang told Yin he was worried that his control of the Unicorn account and insider trading would be discovered.  By that time, the SEC had already issued a subpoena to Jing Wang calling for him to produce information about any brokerage accounts he controlled.  Jing Wang pressed Yin to stick to the false cover story he had created earlier – that his brother, Bing Wang, had made the illegal trades.  Soon afterwards, Jing Wang gave Yin a number of Merrill Lynch documents related to his Unicorn account and directed Yin to take the documents to China, give them to Bing Wang, and help his brother use them to corroborate the false cover story.  Yin agreed, and during two trips to China in 2012, Yin met with Bing Wang, provided him with Unicorn documents removed from the United States, and rehearsed the false cover story.  The indictment further alleges that after these meetings, Bing Wang and Yin sent emails to each other containing false and misleading statements in order to make it appear that Bing Wang actually controlled the Unicorn and Clearview accounts.

DOJ Guilty Plea

DOJ Indictment

SEC Complaint

 

https://lawprofessors.typepad.com/intfinlaw/2014/07/former-senior-executive-of-qualcomm-pleads-guilty-to-insider-trading-and-money-laundering.html

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