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HP pays $108 million to settle bribery investigation

SEC, DOJ finds tech company violated the Foreign Corrupt Practices Act

Palo Alto-based Hewlett-Packard has agreed to pay a $108 million settlement following an investigation by the U.S. Department of Justice and Securities and Exchange Commission of alleged bribery activities conducted by its subsidiaries in Russia, Poland and Mexico.

Hewlett-Packard violated the Foreign Corrupt Practices Act (FCPA) when its subsidiaries in three countries made improper payments to government officials to obtain or retain lucrative public contracts, according to a SEC press release.

The settlement also covers a parallel criminal case announced today by the U.S. Department of Justice, according to the release.

The SEC found that between 2000 and 2007, Hewlett-Packard's subsidiary in Russia paid more than $2 million through agents and various shell companies to a Russian government official to retain a multi-million dollar contract with the federal prosecutor's office.

In Poland between approximately 2006 and 2010, the technology company's subsidiary provided gifts and cash bribes worth more than $600,000 to a Polish government official to obtain contracts with the national police agency, the release states.

According to the SEC, as part of the company's bid to win a software sale worth approximately $6 million to Mexico's state-owned petroleum company, Hewlett-Packard's subsidiary in the country paid more than $1 million in inflated commissions to a consultant with close ties to company officials, and money was funneled to one of those officials. At least $125,000 was funneled to a government official at the petroleum company with whom the consultant had connections, the release states. This was internally referred to as the "influencer fee."

"Hewlett-Packard lacked the internal controls to stop a pattern of illegal payments to win business in Mexico and Eastern Europe. The company's books and records reflected the payments as legitimate commissions and expenses," Kara Brockmeyer, chief of the SEC Enforcement Division's FCPA Unit, stated in the release. "Companies have a fundamental obligation to ensure that their internal controls are both reasonably designed and appropriately implemented across their entire business operations, and they should take a hard look at the agents conducting business on their behalf."

Hewlett-Packard consented to the SEC's order, which finds that it violated the internal controls and books and records provisions of the Securities Exchange Act of 1934, the release states. The company agreed to pay $29 million in disgorgement (approximately $26.47 million to the SEC and $2.53 million to satisfy an IRS forfeiture as part of the criminal matter). The Palo Alto company also agreed to pay prejudgment interest of $5 million to the SEC and fines totaling $74.2 million in the criminal case for a total of more than $108 million in disgorgement and penalties.

The SEC's investigation was conducted by David A. Berman and Tracy L. Davis of the FCPA Unit in San Francisco, with help from the U.S. Department of Justice's Fraud Section and the U.S. Attorney's Office for the Northern District of California as well as the Federal Bureau of Investigation, Internal Revenue Service and Public Prosecutor's Office in Dresden, Germany.

Elena Kadvany

Comments

Posted by another HP scandal, a resident of Downtown North
on Apr 9, 2014 at 12:34 pm

First the "pretexting" spying scandal and now this bribery scandal. Why is HP still in business? Why are no CEOs in jail for these crimes?


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Apr 9, 2014 at 5:26 pm

So exactly how much corruption, and bribery, took place? Why not lay out the case, so that we can actually see who was doing what to whom?

And the question about jail time for those in the management chain should be on the table. Where is Anna Eshoo on this? [Portion removed.]


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