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HP Making $108 Million Settlement to Avoid Bribery, Embezzlement, Tax Evasion Charges by SEC
To resolve civil and criminal charges over violations of the Foreign Corrupt Practices Act, Hewlett Packard will be paying $108 million to the Securities Exchange Commission (SEC), according to an announcement made by the U.S. Department of Justice (DOJ).
The DOJ and SEC first investigated allegations against employees of HP Russia regarding violations of the FCPA. Later, HP subsidiaries in Poland and Mexico were also probed for shoddy dealings relating to Poland’s national police agency and Mexico’s state-owned petroleum agency.
SEC has charged all three HP subsidiaries for making improper payments to government officials to obtain or retain lucrative public contracts. To settle the case, the three entities of HP will pay a total of $76,760,224 in criminal penalties and forfeiture. HP will additionally pay an amount of $31,472,250 in disgorgement, prejudgment interest, and civil penalties.
According to the SEC’s order, HP’s subsidiary in Mexico paid almost $125,000 in inflated commissions to a consultant with close ties to a government official at the state-owned petroleum company to bag a public IT contract worth about $6 million. This consultant was not an approved deal partner and had not been subjected to the due diligence required under company policy. The SEC said that sales managers at HP Mexico used a pass-through entity to pay inflated commissions to the consultant.
Similarly HP Russia paid more than $2 million between 2000 to 2007 through agents and various shell companies to a Russian government official to win a multi-million dollar contract with the federal prosecutor’s office for computer hardware and software.
HP Poland took a similar route to acquire more business as its sister concerns. Acting primarily through its public sector sales manager, the Poland subsidiary provided gifts and cash bribes worth more than $600,000 from 2006 to 2010 to a Polish government official to obtain contracts with the national police agency. The official received a percentage of net revenue earned from the contracts, and cash bribes were given from off-the-books accounts.
HP has defended its actions in its December 2013 annual report, saying that in certain foreign countries and developing economies it is common to engage in business practices that are prohibited by laws and regulations in the U.S. But the DOJ thinks differently. According to Deputy Assistant Attorney General Bruce Swartz, “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.”
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