HTC’s former VP of Product Design Thomas Chien (photo: HTC blog)

Taiwanese company HTC has not been having a happy time of late. Senior departures, including its COO; a halving of market share since 2011; former UK execs setting up a rival company; disappointing Q2 financials; and the possibility of the first ever loss in the company’s history in Q3.

But the latest saga in the company’s troubles read more like the plot of a soap opera than real-life. First, several of HTC’s former lead designers were arrested last week on suspicion of fraudulent expenses claims and leaking of trade secrets. Now Engadget reports that one of those arrested, ex-VP of Product Design Thomas Chien, may have been involved in a conspiracy with a Chinese municipal government to use both the trade secrets are purloined cash to create a rival smartphone company in China … 

The alleged offer was that if Chien left HTC with some of the technology plus some money, then the municipal government would — through another company it set up — take care of the remaining costs for opening the factory, production and marketing. Previous reports say while still at HTC, the ex-exec had e-mailed some confidential Sense 6.0 files to external contacts, but there’s no confirmation on whether those people are linked to the Chengdu government …

Ironically, the news comes a week after the WSJ suggested that HTC was itself planning a big new push into the Chinese market.

Chien, together with ex-R&D director Wu Chien-hung and ex-design team senior manager Justin Huang, is accused of using an external design company to invoice HTC for around $670,000 of fictitious design work on the HTC One, when the work was actually done entirely by in-house designers. Chien had set up two smartphone design companies, Xiaoyu in Taiwan and Yu in China.

Investigators apparently found about $260,000 worth of cash in Chien’s car, which was still parked in HTC’s car-park. Asked to explain it, Chien said that he “couldn’t remember” where the money came from. That can happen, right?

Huang was released on bail, while Chien and Wu remain in custody.

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