* Comptroller says disclosure protects shareholder interests
* Lawsuit opens new front in battle over political spending
* Pension fund sought information since at least August 2012
By Hilary Russ and Tom Hals
Jan 3 New York State's $150-billion public
pension fund has sued Qualcomm Inc., seeking to force the
chipmaker to reveal its political spending, according to the
The suit was filed late on Wednesday in Delaware Court of
Chancery, after Qualcomm refused the request by the New York
State Common Retirement Fund -- a Qualcomm shareholder -- to
inspect records detailing the use of corporate resources for
political activities, said state comptroller Thomas DiNapoli,
who oversees the fund.
"Without disclosure, there is no way to know whether
corporate funds are being used in ways that go against
shareholder interests," DiNapoli, a Democrat who is up for
re-election in 2014, said in a statement.
The suit opens a new front in the fight over corporate
political spending, which has risen dramatically since the U.S.
Supreme Court's 2010 ruling in Citizens United.
That decision lifted restrictions on corporate political
spending and led in part to an unprecedented $6 billion of
spending on the recently held U.S. elections.
While other companies have agreed to increase their
disclosure of political spending, Qualcomm has not, the lawsuit
A spokeswoman for San Diego, California-based Qualcomm said
the company had no immediate comment.
The New York State fund, the third-biggest public pension
plan in the United States, owns more than 6.1 million Qualcomm
shares, which are valued at about $396 million, based on
Thursday's share price. The stake represents 0.36 percent of
outstanding Qualcomm shares and makes the fund the company's
52nd largest shareholder, according to Thomson Reuters data.
New York is Qualcomm's largest U.S. public pension fund
shareholder. The California Public Employees Retirement System,
the largest U.S. pension fund with $241 billion in assets, owns
about 4.3 million Qualcomm shares.
Since at least August 2012, the pension fund has repeatedly
attempted to get the information from Qualcomm, but the company
has refused to divulge it, the suit claimed.
New York's pension fund is "concerned that it cannot
determine whether senior executives and directors of Qualcomm
are spending corporate resources to support their favored
political candidates" or on causes that aren't focused on
boosting shareholder value, the complaint said.
Other sources show that in 2012, Qualcomm spent more than
$4.7 million on federal lobbying efforts, according to the
The precise total is not known, DiNapoli told Reuters.
"Qualcomm has been particularly resistant in terms of
disclosure," he said.
"The real question is we don't know what kind of spending
they're doing," he said. "We have the right to have access to
books to see where the spending is going."
In 2010, the fund and a group of other institutional
investors asked most of the 500 biggest U.S. companies to
Over the past two years, the group filed 27 related
shareholder resolutions seeking more transparency, reaching
deals with 10 companies, the comptroller said.
WITH NOVEL APPROACH, SUCCESS UNCERTAIN
The suit is believed to be the first in Delaware, where
Qualcomm and most major U.S. companies are incorporated, to use
the state's books-and-records law to compel political spending
disclosures, a DiNapoli spokesman said.
As an institutional investor, the fund could attempt to
remove directors from Qualcomm's board or sue board members if
they were found to have wasted assets, the complaint said.
DiNapoli's office previously asked Qualcomm to provide
documents that identified the date, recipient and amount of each
political expenditure the company has made since Jan. 21, 2010,
as well as documents detailing the company's expenses for trade
associations and other tax-exempt groups.
DiNapoli's office also asked for minutes of board meetings
during which political causes or candidates were discussed.
The case would be tough to win if New York State claims
that shareholders are entitled broadly to all documentation
about political spending, according to Larry Hamermesh, a
professor at Widener University School of Law in Wilmington,
"I can't see a court saying that is correct any more than
what a company spends on business in China are a legitimate
subject for shareholder inspections," he said.
Hamermesh said investors might gain access if they take a
targeted approach such as seeking contributions to specific
races or contributions approved by the CEO.
Charles Elson, director of the Weinberg Center for Corporate
Governance at the University of Delaware, said that if
DiNapoli's legal team cannot point to evidence -- such as news
reports that raised suspicions about the company's spending --
the lawsuit might not survive scrutiny by a judge who sees it as
a fishing expedition,
But if it passes muster, the suit could become a model for
other shareholders, Elson said.
DiNapoli's complaint said that studies indicate that
corporate political spending is, in general, negatively
correlated with enterprise value and can indicate widespread
deficiencies in corporate governance.
Political donations can also backfire on corporations. For
instance, Target Corp. in 2010 donated $150,000 to a political
group that supported Minnesota gubernatorial candidate Tom
Emmer, who opposed same-sex marriage. The contribution sparked
backlash and led Target to later apologize, the suit noted.