Qualcomm Sales Director Admits Insider Trading
SAN DIEGO –Derek Montague Cohen, a former Sales Director at Qualcomm, Inc (NASD: QCOM) pled guilty today to insider trading and admitted netting almost $200,000 in fraudulent proceeds by trading ahead of Qualcomm’s 2011 acquisition of Atheros Communications. At the time of his illegal trade, Cohen was a director in Qualcomm’s North America Sales Department. Two of his former colleagues in the Sales Department -- Robert Herman and Michael Fleischli -- have already been charged and taken responsibility for their misconduct.
According to Cohen’s plea agreement, he and Herman were part of an informal stock trading group that occasionally shared tips and opinions with each other about the stock market. Beginning in December 2010, their immediate supervisor notified them that Qualcomm was contemplating a major acquisition of a public company, and emphasized that this information was secret. Because of his access to inside information at Qualcomm, Cohen knew there were a limited number of companies that could potentially be considered as acquisition targets by the company.
As detailed today in court, by the morning of January 4, 2011, Cohen had learned from his position at Qualcomm that the identity of the acquisition target was Atheros. Cohen then engaged in a series of stock and options trades to take advantage of this inside information at the expense of ordinary shareholders. Over the span of just a few hours, Cohen purchased 10,400 shares of Atheros stock, and 375 call options in Atheros, at a cost of over $430,000. Less than an hour after Cohen’s last illegal trade, the New York Times reported on the planned acquisition by Qualcomm, which caused Atheros’s stock price to rocket upward. Defendant sold his stock and stock options later that month for an illegal profit of just under $200,000 – an amount that he agreed to forfeit to the United States as part of his plea agreement.
Cohen was the fourth former Qualcomm executive charged with insider trading in connection with the company’s Atheros acquisition. Jing Wang, Qualcomm’s former Executive Vice President and President of Global Business Operations, pled guilty in July 2014 to insider trading and money laundering based on three separate instances in which he misused Qualcomm’s confidential information to trade in a secret brokerage account in the name of a British Virgin Islands entity. Wang – who reaped over $240,000 from his insider trading and then attempted to obstruct federal investigations into his misconduct – is to appear in federal court on February 20, 2015, at which time his sentencing hearing will be scheduled. Cohen’s co-defendant Robert Herman – who made just under $30,000 in proceeds and pled guilty in late 2014 – was sentenced earlier this month to three years of probation, fined $50,000, and ordered to complete 1,500 hours of community service. The fourth insider trading defendant, Michael Fleischli, was charged in May 2014 with making approximately $3,000 from insider trading on the Atheros acquisition, and is currently on a three-year period of supervision pursuant to a deferred prosecution agreement.
Wang’s stock broker, former Merrill Lynch vice president Gary Yin, has also been convicted of conspiring with Wang to launder the proceeds of Wang’s insider trading and obstruct the investigation into his misconduct. Yin is also scheduled to appear in federal court on February 20, when it is expected that his sentencing hearing will be set.
United States Attorney Laura E. Duffy complimented the Federal Bureau of Investigation for its exemplary work on this matter and expressed appreciation for the Los Angeles office of the U.S. Securities and Exchange Commission, Division of Enforcement (“SEC”), which worked collaboratively with prosecutors while conducting separate civil investigations of the same securities fraud offenses.
Cohen’s sentencing is set for May 22, 2015 at 9:00 a.m. before the Honorable Janis L. Sammartino.
|DEFENDANT||Case Number: 14CR1202-JLS|
|Derek Montague Cohen||Age: 52||San Diego, California|
Title 15, U.S.C., Secs. 78j(b), 78ff – Securities Fraud (Insider Trading). Maximum penalties include 20 years in prison, $5 million fine and three years of supervised release.
|DEFENDANT||Case Number: 13CR3487-WQH|
|Jing Wang||Age: 52||Del Mar, California|
Title 15, U.S.C., Secs. 78j(b), 78ff – Securities Fraud (Insider Trading). Maximum penalties include 20 years in prison, $5,000,000 fine, three years of supervised release, and restitution.
Title 18, U.S.C., Secs. 1956(a)(1)(B)(i) – Money Laundering. Maximum penalties include 20 years in prison, $500,000 fine, and three years of supervised release.
|DEFENDANT||Case Number: 13CR3488-WQH|
|Gary Yin||Age: 56||San Diego, California|
Title 18, U.S.C., Sec. 371 – Conspiracy to obstruct proceedings and commit money laundering. Maximum penalties include 5 years in prison, $250,000 fine, three years of supervised release, and restitution.
Federal Bureau of Investigation