The New York State comptroller, seeking to force greater public disclosure of corporate political spending, has sued Qualcomm, demanding to view internal records of political expenditures by the company, one of the country’s largest makers of computer chips for mobile devices.
The suit by the comptroller, Thomas P. DiNapoli, was a novel and potentially significant tactic in the running battle over corporate political spending in the post-Citizens United era, after a 2010 Supreme Court ruling that opened the door to unlimited political spending by corporations and unions.
Qualcomm’s founder, the billionaire Irwin Jacobs, and some of the company’s top executives are major donors to the Democratic Party: Mr. Jacobs contributed at least $2.3 million to three Democratic “super PACs,” including one dedicated to re-electing President Obama, last year.
Mr. DiNapoli, a Democrat, is also seeking to determine whether Qualcomm made corporate contributions to tax-exempt groups and trade associations that are not required to disclose their donors. Such groups poured hundreds of millions of dollars into the 2012 election, including money from large corporations seeking to avoid negative publicity or customer outcries.
A Qualcomm spokeswoman would not comment on whether the company had contributed to tax-exempt groups.
In a statement, Donald J. Rosenberg, Qualcomm’s general counsel, said the company was surprised by the lawsuit. “Qualcomm is well regarded for its open and transparent culture and fully complies with all local, state and federal laws governing political activity and the disclosure of that activity — and the lawsuit does not suggest otherwise,” Mr. Rosenberg said.
He said that Mr. DiNapoli “knows from conversations we have had in the past Qualcomm was already in the process of enhancing our shareholders’ ability to access Qualcomm’s political contributions on our Web site.”
Mr. DiNapoli is asserting the right to access Qualcomm’s spending records as the sole trustee of the New York State pension fund, which is a major shareholder in Qualcomm and one of the largest public institutional investors in the country. He maintains that the contributions could pose financial risks for shareholders.
Qualcomm is based in California but registered in Delaware, whose law gives shareholders the right under some circumstances to inspect a company’s books.
Mr. DiNapoli filed the lawsuit on Wednesday in a state court in Delaware after Qualcomm rebuffed requests by the New York pension fund and other institutional investors to disclose its political spending. If successful, he could establish a precedent giving shareholders the right to inspect contribution records.
“We’ve done the petitions and the letter-writing,” Mr. DiNapoli said in an interview. “We’ve done shareholder resolutions. Rather than continue to be rebuffed, we’re taking this new approach.”
Mr. DiNapoli’s suit is one of a wave of actions by pension funds and other institutional investors attempting to limit or force disclosure of corporate political spending in the wake of the Citizens United ruling. More than 100 shareholder resolutions concerning corporate political contributions were filed last year, according to Institutional Shareholder Services, which tracks proxy actions.
“We believe that shareholders have a right to know how money is being spent in the political arena,” said Amy Borrus, deputy director of the Council of Institutional Investors, an association of pension funds, endowments and foundations. “Boards need to step up to the plate and ensure that political checks that a company writes enhance, not erode, shareholder value.”
Many of the new efforts to force disclosure of contributions are emerging in New York, where some of the nation’s biggest corporations and charities do business, giving state and local elected officials the leverage to pursue political spending that has national implications.
The New York State attorney general, Eric T. Schneiderman, has spent several months investigating political spending by politically active tax-exempt groups that raise money in New York; last month, he issued a regulation that will force many of them to disclose their donors. Bill de Blasio, the New York City public advocate, who is a trustee of the city’s pension fund, has secured pledges from a number of large businesses that they will not spend money on campaigns.
Mr. DiNapoli’s suit, filed in Delaware Chancery Court, is known as a books-and-records demand. While such demands are typically used to try to prove mismanagement, waste or wrongdoing by corporate executives or board members, the comptroller’s complaint asserts that political spending creates financial risk for companies and that shareholders should be entitled to be able to evaluate those risks.
“It really gets to the heart of the question of transparency,” Mr. DiNapoli said. “How is a corporation spending money in the political process and how does that impact shareholder value? The first step in evaluating that from a shareholder perspective is to find out where the money is being spent.”
Harvey Pitt, who was chairman of the Securities and Exchange Commission under President George W. Bush, said he believed that Mr. DiNapoli’s suit was consistent with the purpose of the Delaware law that permits such records demands.
“I don’t want to predict where the Delaware court will come out, but where you have a very large shareholder and something related directly to corporate governance, it seems to me a pretty compelling circumstance” under the state law, Mr. Pitt said.
Qualcomm scores relatively low on the CPA-Zicklin Index, a ranking of corporations’ policies on political transparency, which was created by the Center for Political Accountability, a nonprofit watchdog organization.
New York Comptroller Sues Qualcomm for Data on Political Giving
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New York Comptroller Sues Qualcomm for Data on Political Giving
