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December 30, 2013

Charged with Spilling and Stealing Secret Trade Information puts HTC Employees in Hot Water

This year has not been one of HTC’s best. In 2013, HTC has seen a dwindling market share for its smartphones. There were many problems on the supply side that had the calamitous effect of causing the HTC One to be way behind the scheduled delivery date. 

This is possibly one of the factors involved concerning the fact that third quarter 2013 was the first time that HTC reported a loss. We also saw that this year, HTC has had some issues with Nokia. These two companies are involved in their own patent war.

At the beginning of December Nokia scored a win in a patent case against HTC in the U.K. The court ruled that some HTC products did infringe upon some of Nokia patents. Unfortunately, this includes the flagship HTC One. This has led to a court ruling that HTC cannot sell the HTC One Mini in the U.K.

All of the issues that have led up to the fact that HTC reported a quarterly loss for the first time ever has forced, or possibly inspired HTC chairwoman and co-founder, Cher Wang, to take a much more proactive approach to her company. She has mostly been known as laid back and hands off.

Can it be that some of her employees took it a little too far? A report comes to us from ValueWalk by way of the Wall Street Journal. Yesterday, it was reported that six HTC employees have been indicted by the Taipei District Prosecutor’s Office. The charges are revealing trade secrets, falsifying expenditures and accepting kickbacks.

According to the report, six employees were indicted. Five of the people involved are, HTC research and development director Wu Chien-hung, HTC senior manager for design and innovation Huang Kuo-ching, senior manager Huang Hung-yi, manufacturing design department manager Hung Chung-yi and Chen Shih-tsou.

It appears that the worse of the lot is design vice president, Thomas Chien. According to the Taiwanese prosecutors, Chen allegedly showed and discussed the design of a new, undisclosed HTC smartphone to potential business partners during a meeting in China in June. 

The information points to the fact that Chien along with Wu Chien-hung were planning to open smartphone design companies. These would have been in cooperation with rumored partners backed by the Chinese government.

Now, I remember back in the days when I worked in a corporate office, I had a hell of a time justifying all of my actual expenses. These two people however, have also been charged with “conniving to inflate their expenses report.”

Their goal was to claim a healthy chunk of $1.12 million that were reported as expanses. They weren’t alone in this part of the scheme. Three suppliers were also charged with helping the two inflate their expense reports.

Chien has been incarcerated since August. If the reports are accurate, the courts will take a very harsh stand with Chien. To date, he has not confessed to any wrong doings. The other accused, including the HTC suppliers, might receive a more lenient treatment for showing remorse to their crime.

Since Chien has displayed no remorse for his actions, in fact he is arguing on behalf of his actions, the prosecution is hoping to enforce the maximum penalty. According to the prosecutors, everyone except Chien and Chung-yi have admitted to their wrong doings.

An HTC spokesperson release the following statement, "The company expects employees to observe and practice the highest levels of integrity and ethics. Protecting the company's proprietary and intellectual properties, privacy and security is a core fundamental responsibility of every employee. The company does not condone any violation."

According to Taiwanese law, punishment for this type of crime can result in a maximum of up to 10 years in prison. In addition, there would be a fine that could range anywhere from $100,000 to as much as $1.67 million. If the perpetrators’ gains are over $1.67 million then the fine can be as much as 10 times the actual gains acquired through the illegal acts.

Interestingly, Kuo-ching and Hung-yi already settled their disputes with HTC. It seems that HTC is a forgiving company since they were subsequently forgiven. Prosecutors feel this is too lenient and recommend suspension for both employees.

As a side note, Chien is the person who is credited for the design of the HTC One.

Edited by Cassandra Tucker

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