Hewlett-Packard this week agreed to pay $108 million to the U.S. Securities and Exchange Commission and the U.S. Department of Justice to settle money laundering and bribery charges. The charges were brought against HP for violations of the Foreign Corrupt Practices Act. According to the charges, the company’s subsidiaries provided substantial bribes to officials in foreign countries to secure IT contracts.
“Hewlett-Packard lacked the internal controls to stop a pattern of illegal payments to win business in Mexico and Eastern Europe,” said Kara Brockmeyer, chief of the FCPA Unit of the SEC’s Enforcement Division. “The company’s books and records reflected the payments as legitimate commissions and expenses. 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.”
Three of HP’s subsidiaries in Mexico, Poland, and Russia were implicated by an SEC-led investigation.
In Mexico HP was found to have funneled at least $125,000 through a state-owned oil company to a consultant in exchange for help in winning a $6 million government contract. According to the SEC, HP Mexico salespersons referred to this payment as an “influencer fee.”
In Poland, HP bribed a government official from 2006 to 2010 in exchange for securing IT contracts. The Polish official was paid, in off-the-books cash, a percentage of the revenues earned through the contracts.
In Russia HP paid bribes to agents and consultants to secure government hardware and software contracts. This occurred between 2000 and 2007.
HP released a statement this week characterizing the bribery and money laundering as the work of a small number of already-fired employees. The company emphasized that it will comply with its obligations under the terms of the settlement.
“The misconduct described in the settlement was limited to a small number of people who are no longer employed by the company,” said John Schultz, EVP and general counsel, at HP. “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.”
As part of the settlement, HP has admitted to violating the internal controls and books and records provisions of the Securities Exchange Act. The company will pay $26.47 million to the SEC, $2.53 million in IRS forfeiture, $5 million in prejudgement interest, and multiple fines totaling $74.2 million.
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