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Ex-Qualcomm Sales Directors Charged With Insider Trading

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Qualcomm, the world’s largest maker of mobile-phone chips, which gets the majority of its profit from technology licensing, said it will use the patents to “offer even more value to current and future licensees.” Photographer: David Paul Morris/Bloomberg

May 13 (Bloomberg) -- Two former Qualcomm Inc. sales directors were charged with insider trading, allegedly making $230,000 in profit from trades in Atheros Communications Inc. when Qualcomm bought the company in 2011.

Derek Cohen and Robert Herman, both 52, were charged with four counts of securities fraud, according to a statement yesterday by the U.S. Attorney’s Office in San Diego. They invested more than $500,000 in Atheros stock and options after they learned Qualcomm would be buying the company and before the $3.2 billion acquisition was announced, prosecutors said.

“This indictment should send a message throughout Southern California and beyond: The Department of Justice will not tolerate the manipulation of the securities markets for cynical and selfish personal gain,” U.S. Attorney Laura Duffy said in the statement.

The Securities and Exchange Commission filed a parallel lawsuit against both men as well as a third former Qualcomm salesman. Cohen was arrested three days ago at Los Angeles International Airport, after he returned from a trip to the Philippines, and pleaded not guilty at an arraignment hearing yesterday, according to the statement. Herman is at large, prosecutors said.

An ex-president of Qualcomm Inc.’s global business operations was charged in September with taking part in an insider-trading scheme involving shares of the mobile-phone chipmaker as well as those of Atheros. That executive was accused in an SEC lawsuit of making at least $244,000 from his illegal trades.

‘Fully Cooperating’

“The defendants named in the complaint are no longer employed by Qualcomm,” Christine Trimble, a spokeswoman for the San Diego-based company, said yesterday in an e-mailed statement. “We have been fully cooperating with the government’s investigation and these matters will now be addressed through the legal system.”

Cohen and Herman told the company, which conducted an internal investigation of insider trading related to the Atheros deal, that they had learned about the planned acquisition from a New York Times story, according to the SEC complaint. Qualcomm fired the two men in September, according to the SEC complaint.

Last year Qualcomm had 99 percent of the market for smartphone processors with integrated modems capable of accessing the fastest wireless-data networks, a dominance that let it capture 64 percent of total mobile-phone chip revenue.

The case is U.S. v. Cohen, 14-cr-01202, U.S. District Court, Southern District of California (San Diego).

To contact the reporter on this story: Edvard Pettersson in Federal court in Los Angeles at

epettersson@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg

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