From the daily archives: Tuesday, July 22, 2014

SAN DIEGO—Jing Wang, the former Executive Vice President and President of Global Business Operations for Qualcomm, Inc. (NASDAQ: QCOM), admitted this afternoon to engaging in insider trading in the stock of both Qualcomm and Atheros Communications, Inc. (“Atheros”) using a nominee brokerage account and an offshore shell company in the British Virgin Islands (“BVI”). Wang also admitted laundering the proceeds of his insider trading using a second BVI shell company, and arranging with his brother and his former stock broker to obstruct investigations by the U.S. Securities and Exchange Commission and Federal Bureau of Investigation.

United States Attorney Laura E. Duffy and Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division announced the guilty pleas by Jing Wang today in Federal Court in San Diego, California. Wang pled guilty to one count of insider trading and one count of laundering of monetary instruments, and was ordered to return to court for sentencing on November 17, 2014 at 9:00 a.m. before the Hon. William Q. Hayes.

“Jing Wang blatantly and repeatedly abused the trust placed in him by Qualcomm and the company’s shareholders. To make matters worse, he then misused the financial system to conceal his insider trading profits, and enlisted his brother and stock broker to obstruct several investigations,” said United States Attorney Duffy. “We will continue to use our excellent partnerships with the Criminal Division, the FBI, IRS-CI and securities regulators to not only prosecute securities fraud, but also ferret out attempts to conceal criminal conduct from government investigators.”

Not satisfied with his lucrative executive position at Qualcomm, Jing Wang traded on insider information about the company’s acquisitions and earnings to gain an illegal advantage in the financial market,” said Assistant Attorney General Caldwell. “Wang then laundered close to $250,000 in insider trading profits, and created a cover-up story to hide his crimes. We will continue to prosecute those who believe they can make easy money by breaking the laws that ensure a level playing field in the financial marketplace.

FBI Special Agent in Charge Daphne Hearn commented, “Trading on inside information is a crime that undermines the public’s faith in our financial markets and puts companies at risk. The FBI will continue to use our investigative expertise and resources to detect, disrupt and dismantle sophisticated fraud schemes to ensure the public maintains full faith and confidence in our financial markets.”

Erick Martinez, Special Agent in Charge for IRS Criminal Investigation commented: “Jing Wang abused his position as a high level executive as if he was immune to our nation’s laws. Pursuing financial crime and money laundering violations by corporate executives like Jing Wang is a priority for IRS Criminal Investigation. Today’s admission of guilt by Mr. Wang is another example of IRS Criminal Investigation’s continued commitment to ensure that the laws of this nation apply to everybody.”

Insider Trading

Wang admitted that in 2006 he used his Merrill Lynch broker in San Diego (Gary Yin) to create a BVI entity entitled Unicorn Global Enterprises (“Unicorn”) and to open a brokerage account for Unicorn at Merrill Lynch. Wang provided documents to Yin to create the false impression that his brother in China, Bing Wang, controlled the account, when in fact Wang was the true owner of the account. This allowed Wang to conceal his true ownership and control of the assets in the account.

Several years later, Qualcomm promoted Wang to Executive Vice President and imposed significant restrictions on his stock trading pursuant to its insider trading policy. As an officer, Wang was exposed to Qualcomm’s confidential business information, and was repeatedly notified that he was not permitted to misuse Qualcomm’s material, non-public information to engage in stock transactions. Despite these warnings, between 2010 and 2011, Wang abused his trusted position at Qualcomm to engage in three separate instances of insider trading.

By early 2010, Wang learned that Qualcomm planned to announce an increased quarterly dividend and a stock repurchase program. On March 1, 2010, Wang fraudulently acted on this market-moving inside information by directing Yin to use all of the assets in the Unicorn account to purchase as much Qualcomm stock as possible before the information became public. After the close of trading on March 1st, Qualcomm issued a press release announcing the dividend increase and stock repurchase program, and the company’s stock later appreciated approximately 10% in value.

Later in 2010, Wang executed a second insider trading scheme upon learning that Qualcomm was interested in purchasing Atheros, previously a publicly-traded company based in San Jose, California. On December 1, 2010, fraudulently acting on this inside information, Wang met with Yin and instructed him to sell all Qualcomm shares in the Unicorn account. Wang then told Yin to make preparations to purchase Atheros with the funds in the account, but to wait for further confirmation. Wang’s broker proceeded to liquidate all of the illegally held Qualcomm stock in the Unicorn account, reaping for Wang almost $95,000 from his first insider trading scheme.

On December 6, 2010, while attending a meeting of Qualcomm’s Board of Directors in Hong Kong, China, Wang learned that the Board authorized Qualcomm to make a non-public offer to purchase Atheros for $45 per share. Later that same day, Wang called Yin in San Diego and instructed him to go ahead and use all available funds in the Unicorn account to purchase Atheros stock. The broker followed Wang’s instructions and purchased 10,800 shares at approximately $34 per share. Qualcomm’s offer to purchase Atheros remained confidential until an article appeared in the Dealbook section of the New York Times’ website on January 4, 2011, and Qualcomm made an official announcement of the deal on January 5, 2011. Between the close of trading on January 3, 2011, and the close of trading on January 5, 2011, the price of Atheros stock jumped from approximately $37 to $44—an increase of close to 20%.

Wang’s third foray into insider trading took place just a few weeks later, on January 25, 2011, when he learned that Qualcomm was about to release record financial results. Immediately before the announcement of those earnings, Wang directed Yin to sell all the Atheros stock in the Unicorn account and use all the proceeds to purchase Qualcomm stock. The following day, after Qualcomm announced the record earnings results, Qualcomm’s stock price increased by approximately $4 per share. All told, Wang illegally gained approximately a quarter of a million dollars from these three insider trading schemes.

Money Laundering

Wang also admitted that he took several steps to conceal his insider trading from the SEC and the FBI. For example, Wang transferred all the money in the Unicorn Account—over $525,000—to another BVI nominee brokerage account in the name of “Clearview Resources, Ltd.” (the “Clearview Account”), which Wang had opened using the name of his mother. Wang provided identification documents associated with his mother to Merrill Lynch to open this account and signed his mother’s name on account documents, making it appear that she was in control of the account. However, it was Wang who actually controlled the Clearview Account and its funds. Wang also admitted working with his brother and Yin to fabricate evidence and concoct a false cover story that would blame Bing Wang for the illegal stock trades. For example, Wang gave Yin a number of Merrill Lynch documents related to his Unicorn account and arranged for the broker to take the documents to China, give them to Bing Wang, and use them to help his brother rehearse the false cover story.

Wang was originally indicted in September 2013 after an investigation conducted by the FBI’s San Diego Field Office and the Internal Revenue Service, Criminal Investigation’s San Diego Field Division. Wang pled guilty to two of the charges contained in the original indictment, which were refiled again today in a Superseding Information. Bing Wang, who is believed to reside in China, remains charged and is currently wanted on an international arrest warrant. Gary Yin pled guilty to conspiring with Jing Wang and Bing Wang to obstruct justice and launder money, and is currently scheduled to be sentenced on September 15, 2014 (13CR3488-WQH).

In addition to praising the investigative efforts of the FBI and IRS-CI, United States Attorney Duffy and Assistant Attorney General Caldwell expressed their appreciation to the SEC’s Los Angeles Regional Office for its assistance with this matter.

DEFENDANT
Criminal Case No. 13CR3487-WQH

Jing Wang
Age: 51
Del Mar, CA

SUMMARY OF CHARGES

Count 1: Title 15, United States Code, Sections 78j(b), 78ff and 17 C.F.R. § 240.10b-5—Securities Fraud (Insider Trading). Maximum Penalty: 20 years’ custody, a $5 million fine, three years’ supervised release, and a $100 special assessment.

Count 2: Title 18, United States Code, Section 1956—Money Laundering. Maximum Penalty: 20 years’ custody, a fine of $500,000 or twice the value of the property involved in the transaction, three years’ supervised release, and a $100 special assessment.

INVESTIGATING AGENCIES

  • Federal Bureau of Investigation
  • Internal Revenue Service-Criminal Investigation
 

This article titled “Government agents ‘directly involved’ in most high-profile US terror plots” was written by Spencer Ackerman in New York, for The Guardian on Monday 21st July 2014 13.30 UTC

Nearly all of the highest-profile domestic terrorism plots in the United States since 9/11 featured the “direct involvement” of government agents or informants, a new report says.

Some of the controversial “sting” operations “were proposed or led by informants”, bordering on entrapment by law enforcement. Yet the courtroom obstacles to proving entrapment are significant, one of the reasons the stings persist.

The lengthy report, released on Monday by Human Rights Watch, raises questions about the US criminal justice system’s ability to respect civil rights and due process in post-9/11 terrorism cases. It portrays a system that features not just the sting operations but secret evidence, anonymous juries, extensive pretrial detentions and convictions significantly removed from actual plots.

“In some cases the FBI may have created terrorists out of law-abiding individuals by suggesting the idea of taking terrorist action or encouraging the target to act,” the report alleges.

Out of the 494 cases related to terrorism the US has tried since 9/11, the plurality of convictions – 18% overall – are not for thwarted plots but for “material support” charges, a broad category expanded further by the 2001 Patriot Act that permits prosecutors to pursue charges with tenuous connections to a terrorist act or group.

In one such incident, the initial basis for a material-support case alleging a man provided “military gear” to al-Qaida turned out to be waterproof socks in his luggage.

Several cases featured years-long solitary confinement for accused terrorists before their trials. Some defendants displayed signs of mental incapacity. Jurors for the 2007 plot to attack the Fort Dix army base, itself influenced by government informants, were anonymous, limiting defense counsel’s ability to screen out bias.

Human Rights Watch’s findings call into question the post-9/11 shift taken by the FBI and other law enforcement agencies toward stopping terrorist plots before they occur. While the vast majority of counterterrorism tactics involved are legally authorized, particularly after Congress and successive administrations relaxed restrictions on law enforcement and intelligence agencies for counterterrorism, they suggest that the government’s zeal to protect Americans has in some cases morphed into manufacturing threats.

The report focuses primarily on 27 cases and accordingly stops short of drawing systemic conclusions. It also finds several trials and convictions for “deliberate attempts at terrorism or terrorism financing” that it does not challenge.

The four high-profile domestic plots it found free of government involvement were the 2013 Boston Marathon bombing; Najibullah Zazi’s 2009 plot to bomb the New York subway; the attempted Times Square carbombing of 2010; and the 2002 shooting at Los Angeles International Airport’s El Al counter.

But the report is a rare attempt at a critical overview of a system often touted by the Obama administration and civil libertarian groups as a rigorous, capable and just alternative to the military tribunals and indefinite detention advocated by conservative critics. It comes as new pressure mounts on a variety of counterterrorism practices, from the courtroom use of warrantless surveillance to the no-fly list and law enforcement’s “suspicious activity reports” database.

In particular, Human Rights Watch examines the extent and impact of law enforcement’s use of terrorism informants, who can both steer people into attempted acts of violence and chill religious or civic behaviour in the communities they penetrate.

Linda Sarsour, the executive director of the Arab American Association of New York, a social services agency, told the Guardian she almost has a “radar for informants” sent to infiltrate her Brooklyn community.

While the FBI has long relied on confidential informants to alert them to criminal activity, for terrorism cases informants insert themselves into Muslim mosques, businesses and community gatherings and can cajole people toward a plot “who perhaps would never have participated in a terrorist act on their own initiative”, the study found.

Many trade information for cash. The FBI in 2008 estimated it had 15,000 paid informants. About 30% of post-9/11 terrorism cases are considered sting operations in which informants played an “active role” in incubating plots leading to arrest, according to studies cited in the Human Rights Watch report. Among those roles are making comments “that appeared designed to inflame the targets” on “politically sensitive” subjects, and pushing operations forward if a target’s “opinions were deemed sufficiently troubling”.

Entrapment, the subject of much FBI criticism over the years, is difficult to prove in court. The burden is on a defendant to show he or she was not “predisposed” to commit a violent act, even if induced by a government agent. Human Rights Watch observes that standard focuses attention “not on the crime, but on the nature of the subject”, often against a backdrop where “inflammatory stereotypes and highly charged characterizations of Islam and foreigners often prevail”.

Among the informants themselves there is less ambiguity. “It is all about entrapment,” Craig Monteilh, one such former FBI informant tasked with mosque infiltration, told the Guardian in 2012.

Informants, the study found, sometimes overcome their targets’ stated objections to engage in terrorism. A man convicted in 2006 of attempting to bomb the Herald Square subway station in Manhattan told an informant who concocted the plot he would have to check with his mother and was uncomfortable planting the bombs himself. One member of the “Newburgh Four” plot to attack synagogues and military planes – whose case is the subject of an HBO documentary airing on Monday – told his informant “maybe my mission hasn’t come yet”.

Once in court, terrorism cases receive evidentiary and pre-trial leeway rarely afforded to non-terrorism cases. A federal judge in Virginia permitted into evidence statements made by a defendant while in a Saudi jail in which the defendant, Amed Omar Abu Ali, alleged torture, a longstanding practice in Saudi Arabia. The evidence formed the basis for a conviction, and eventually a life sentence, for conspiracy to assassinate George W Bush. Mohammed Warsame, who pleaded guilty to conspiracy to provide material support to a foreign terrorist organization, was held in solitary confinement for five years before his trial.

Another implication of the law-enforcement tactics cited the report is a deepening alienation of American Muslims from a government that publicly insists it needs their support to head off extremism but secretly deploys informants to infiltrate mosques and community centers.

“The best way to prevent violent extremism inspired by violent jihadists is to work with the Muslim American community – which has consistently rejected terrorism – to identify signs of radicalization and partner with law enforcement when an individual is drifting towards violence. And these partnerships can only work when we recognize that Muslims are a fundamental part of the American family,” Obama said in a high-profile 2013 speech.

Yet the Obama administration has needed to purge Islamophobic training materials from FBI counterterrorism, which sparked deep suspicion in US Muslim communities. It is now conducting a review of similar material in the intelligence community after a document leaked by Edward Snowden used the slur “Mohammed Raghead” as a placeholder for Muslims.

guardian.co.uk © Guardian News & Media Limited 2010

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