HP pays DOJ, SEC $108 million to settle foreign bribery investigation

HP pays DOJ, SEC $108 million to settle foreign bribery investigation

Summary: While HP's payout settles investigations with U.S. regulators, settlements with international authorities remain.

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TOPICS: Government
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The corruption case that has embroiled HP has somewhat come to a resolution. 

To back track, U.S. Department of Justice and the Securities and Exchange Commission investigated allegations that certain current and former employees of HP Russia engaged in bribery, embezzlement and tax evasion — which constitute violations of the Foreign Corrupt Practices Act.

HP announced Wednesday that it will pay $108 million to the DOJ and SEC to resolve those charges and charges against other foreign HP subsidiaries, and that it has agreed to undertake certain compliance, reporting and cooperation obligations.

John Schultz, executive vice president and general counsel for HP, released the following statement:

The misconduct described in the settlement was limited to a small number of people who are no longer employed by the company. HP fully cooperated with both the Department of Justice and the Securities and Exchange Commission in the investigation of these matters and will continue to provide customers around the world with top quality products and services without interruption.

On a deeper level, the $108 million is a sum of four penalties. On top of the HP Russia allegations, HP subsidiaries in Poland and Mexico were probed for shoddy dealings relating to Poland's national police agency and Mexico's state-owned petroleum agency.

HP Poland was charged with violating the accounting provisions of the FCPA while HP Mexico has entered into a non-prosecution agreement with the government where it will forfeit proceeds and admit and accept responsibility for misconduct.

In total, the three HP entities will pay $76,760,224 in criminal penalties and forfeiture.

The SEC then filed a final judgement against HP under which the company agreed to pay $31,472,250 in disgorgement, prejudgment interest, and civil penalties, bringing the total amount of U.S. criminal and regulatory penalties to the $108-million mark.

Deputy Assistant Attorney General Swartz said in a DOJ announcement:

Hewlett-Packard subsidiaries created a slush fund for bribe payments, set up an intricate web of shell companies and bank accounts to launder money, employed two sets of books to track bribe recipients, and used anonymous email accounts and prepaid mobile telephones to arrange covert meetings to hand over bags of cash. Even as the tradecraft of corruption becomes more sophisticated, the department is staying a step ahead of those who choose to violate our laws, thanks to the diligent efforts of U.S. prosecutors and agents and our colleagues at the SEC, as well as the tremendous cooperation of our law enforcement partners in Germany, Poland and Mexico.

HP defended its actions in its annual report filed last December, saying that in many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and regulations in the U.S.

It's important to state that while HP's $108 million settles investigations with U.S. regulators, settlements with international authorities remain.

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Topic: Government

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4 comments
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  • Oh, joy

    Given that the Foreign Corrupt Practices Act has been on the books since the 1970s, and the exact same arguments HP is making today were rejected by Congress when the statute was first considered, there really is no excuse for this. The law is well known and relatively simple, allowing any reasonably competent corporate lawyer in the US to properly advise his executives on how to comply.

    Those executives involved need to be fired. No mercy is acceptable here.
    John L. Ries
  • So, did they just pay another bribe

    to the US govt ? That is how it looks to me.
    GrabBoyd
    • Perhaps not

      $108 million is a substantial fine. And that's just the US government. Russia, Mexico, Poland, and Germany are still free to sue HP themselves, or prosecute the executives involved (and any evidence uncovered by the US government during its investigation is still in play); and if I remember correctly, the US has extradition treaties with three of the four.

      It doesn't help that HP trotted out the decades-old rationalization that bribery is a mere cost of doing business in some countries. HP doesn't have to do business in any of them; and it could dispatch lobbyists to Washington in an effort to get the statute modified or repealed, if management thinks it too onerous. Besides, of the four countries mentioned, only Mexico qualifies as a third world country. Germany and Poland are EU members and have corruption laws not terribly different than ours (I'm even given to understand that they're enforced). Russia has serious corruption problems, but again, HP doesn't have to do business there. The scary thing is that HP's CEO, Meg Whitman, was the Republican candidate for Governor of California in 2010. Surely, she should have known better than to have allowed her PR people to have issued such a statement.
      John L. Ries
  • Nothing like a great insider’s account to understand how multinationals pay

    One of the best accounts I have read of how US multinationals pay bribes in developing countries, and which I cannot recommend enough, is"High-Tech Planet: Secrets of an IT Road Warrior" written by a former Oracle executive who saw it all.

    It is a funny, brilliant and insightful account of the mechanics used by some US multinationals in bribing government officials in the Third World. The FBI and SEC obviously read the book because following its publications they decided to investigate several companies including such as HP for bribes exactly as they were described in the book.

    The first few chapters can be sampled for free on Amazon: http://amzn.to/czf0qw
    antoinehepburn