Executive 'Steals' Chip Technology to Start Company, Sells it to Employer for $150 million

Qualcomm recently exposed a "mole" fraud case, the process is very strange.

A former vice president of research and development at Qualcomm reinvented a Qualcomm patent, credited his sister as the inventor, and asked a friend to set up a company to market the technology. After an operation, finally sold to Qualcomm at a high price.

On Aug 9, the U.S. Attorney's office issued a notice charging two former Qualcomm Inc executives and two related people with defrauding the company of $150 million in a scam they orchestrated when they acquired a tech startup.

So how did they plan and pull off this scam?

A technology patent that belongs to the employer

In October 2015, Qualcomm acquired a company called Abreezio for $150 million. Qualcomm was interested in a chip technology proprietary to Abreezio.

However, the patent actually belongs to Qualcomm.

In May, a federal grand jury indictment revealed that Kareem & Middot, then Qualcomm's vice president of research and development; While working at Qualcomm, Karim Arabi developed a way to quickly detect chips. Under the employment agreement, Qualcomm owns all intellectual property rights.

However, seeing the huge commercial value of the technology, Araby chose to hide it from the company, packaging it as the creation of a Canadian graduate student.

The graduate student was Araby's sister, Hida & Middot; Sheida Alan, who was studying a professional subject related to inkjet printing, not semiconductor design.

Every step of the scam was carefully planned.

First, Arabi changed his sister's name and then named her as the inventor of the patent. But the patent application was made by Araby using a fake email account.

Arabi also used fake email accounts to contact parties posing as the alleged inventor to add supporting evidence.

Therefore, Qualcomm did not perceive an anomaly in disclosing the owners involved in the development of Abreezeo's intellectual property. Araby's role is perfectly concealed.

The scheme netted Allen nearly $92 million as the nominal inventor of the patent.

A self-directed and self-starred scientific innovation company

Not only are the inventors fraudulent, but Abreezeo was founded in the San Francisco Bay Area as a fraud.

According to court documents, Alabi was deeply involved in much of Abreezio's work. For example, he chose Abreezio as his company's name, designed key steps in the company's development, submitted provisional patents underlying core technology, convened and attended key operational meetings...

Sanjeev & Middot, CEO of Abreezio; Sanjiv Taneja was also Mr. Arabi's choice. In 2015, Taneja began pitching Qualcomm a new chip technology, according to the indictment.

Ali & middot; Akbar & Middot; Ali Akbar Shokouhi was a vice president at Qualcomm in 2014. Three different entities under his control funded and supported Abreezio's technology product development. Prosecutors described Mr. Shokushi as an entrepreneur and consultant whose involvement also made the start-up look legitimate.

One of Mr. Shokushi's companies never disclosed the information to Qualcomm during due diligence. Prosecutors argued that was to avoid scrutiny because a year before Abreezio's sale, Qualcomm said it had conflict-of interest issues with Shokushi for not disclosing the company.

Alaby also provided Abreezio with critical internal Qualcomm information during the acquisition process, helping him optimize his marketing strategy. In February 2015, for example, Mr. Taneja sent Mr. Arabi an email asking for Qualcomm's data in order to understand comparable technology at the time and determine "the 'threshold' we need to cross."

Separately, the indictment reveals how the defendants laundered the money, including purchases of foreign real estate and interest-free loans.

As a result, Qualcomm charged the four defendants with fraud and money laundering.

Of the four defendants, Alaby is certainly the central figure: Alaby served as Qualcomm's vice president of research and development from 2013 to 2016, and Shokushi served as Qualcomm's vice president of engineering from 2011 to 2014, for two years at the same time; Taneja was Araby's choice for Abreezio, and Ellen was Araby's sister.

They take the form of internal and external cooperation, in the form of hidden technology belonging to the employer company, to the outside start-up companies for patent application, and then through the capital operation of valuation and acquisition.

A damning indictment

Araby and Shokushi were arrested in San Diego on the day of the announcement, Taneja was arrested in the Northern District of California, and Allen was arrested in Canada and faces extradition proceedings to the United States, according to a statement from the U.S. Attorney's office.

But Shokushi pleaded not guilty at his arraignment in federal court in San Diego and was released on $1 million bail. Arabi was unable to appear in court for unknown reasons and his arraignment was postponed.

If convicted, the four charged face up to 20 years in prison; They could each be fined $250,000 or twice as much for fraud charges; Money laundering could result in a $500,000 fine and forfeiture.

Thomas Middot, acting head of the FBI's San Diego field office, responded to the case. "Corporate fraud is a serious crime that not only harms individuals and organisations, but also affects shareholders and the company as a whole," said Thomas Ryan, chief executive of corporate Finance. We will uncover the truth, find the perpetrators and bring justice to the victims."

"Intellectual property crimes threaten our economic well-being, and this prosecution shows that we will pursue those who seek to steal and profit from our nation's innovations." Darren Middot, acting special agent in charge of the IRS Office of Criminal Investigation in Los Angeles; "Such schemes not only hurt the company, but also affect the PTO and the civil courts," said Darren Lian.

Randy & middot; "Fraudsters cannot hide behind cutting-edge technology or sophisticated schemes," Grossman said in a statement. The United States Attorney's Office will hunt down criminals and their looted ill-gotten gains, whether they are tucked away in mattresses or scattered throughout the international financial system.

This isn't the first time Qualcomm has sued. Qualcomm sued Alaby, Taneja, and Allen in San Diego Superior Court back in 2017, alleging the same. Sadly, the suit was dismissed in late 2018.

In its latest statement, Qualcomm said: "Protecting intellectual property is a cornerstone of innovation, and we appreciate the U.S. Department of Justice's work in this case.