Digital telecommunications maker Qualcomm disclosed this week in a Form 10-Q filing with the Securities and Exchange Commission that it could face an enforcement action for potential violations of the Foreign Corrupt Practices Act.

On April 23, Qualcomm said it received a Wells Notice last month from the SEC, indicating that SEC staff made a preliminary determination to file an enforcement action against the company for violations of the anti-bribery, books and records, and internal control provisions of the FCPA. The bribery allegations relate to benefits offered or provided to individuals associated with Chinese state-owned companies or agencies.

A Wells Notice is a written notification from the SEC's Division of Enforcement that a company is under investigation for potential violations of federal securities laws. The purpose of the notice in this early stage is to alert companies that they may soon face charges from the SEC. For most companies, it is the first indication that the SEC is looking into potential violations. 

In January 2012, Qualcomm learned that the Department of Justice began an investigation into potential violations of the FCPA. The audit committee, with the assistance of independent counsel and independent forensic accountants, then conducted an internal review of the company's compliance with the FCPA and its related policies and procedures.

That internal review discovered instances in which “special hiring consideration, gifts, or other benefits were provided to several individuals associated with Chinese state-owned companies or agencies,” the company stated. “Based on the facts currently known, the company believes the aggregate monetary value of the benefits in question to be less than $250,000, excluding employment compensation.”

“As a result of the audit committee's review, the company has made and continues to make enhancements to its FCPA compliance program, including implementation of the audit committee's recommendations,” the company stated.

The Wells Notice indicated that the SEC's recommendation could involve a civil injunctive action and could seek remedies that include disgorgement of profits, the retention of an independent compliance monitor to review Qualcomm's FCPA policies and procedures, an injunction, civil monetary penalties and prejudgment interest.

In response, Qualcomm said it made a Wells submission to the SEC on April 4 explaining why it believes it has not violated the FCPA and, therefore, why an enforcement action is not warranted.

Qualcomm said it is cooperating with the SEC and Justice Department, “but is unable to predict the outcome of their investigations or any action that the SEC may decide to file.”

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