SEC charges IBM with bribing Korean, Chinese officials

IBM subsidiaries gave officials free travel, entertainment and other gifts, according to the SEC's lawsuit

The U.S. Securities and Exchange Commission has charged IBM with giving hundreds of thousands of dollars in bribes to South Korean and Chinese officials starting in the late 1990s, according to court documents filed Friday.

IBM has agreed to pay US$10 million to settle the SEC lawsuit, the Wall Street Journal reported Friday. An IBM spokesman confirmed that the company has agreed to a settlement, but didn't disclose the amount.

"IBM insists on the highest ethical standards in the conduct of its business and requires all employees to follow its policies and procedures for conducting business," the company said in a statement.

Payments from IBM subsidiaries to South Korean officials in the form of gifts, travel and entertainment totaled US$207,000 and continued from 1998 to 2003, according to a lawsuit filed by the SEC in U.S. District Court for the District of Columbia.

The alleged bribes to Chinese officials were more recent, from 2004 to 2009, with employees of IBM subsidiaries creating "slush funds" at Chinese travel agencies, resulting in a "widespread" practice of giving trips, entertainment and other gifts to Chinese officials, the SEC lawsuit said.

The lawsuit doesn't put a value on the gifts allegedly provided to Chinese officials, but there were 114 instances between 2004 and 2009 when IBM employees in China worked with a local travel agency to fake invoices in an effort to make the trips appear legitimate, the SEC said in its lawsuit.

The lawsuit details several cases of alleged bribery in South Korea. In a December 1998 case, IBM South Korean employees delivered a shopping bag filled with more than $19,000 to a government official there, the lawsuit said.

IBM lacked the internal controls to stop the bribes from happening, the lawsuit said.

The bribes are a violation of the Foreign Corrupt Practices Act, the SEC said. The agency has asked the court to order IBM to give up any ill-gotten gains due to the alleged bribes.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Tags U.S. Securities and Exchange CommissionCriminalbusiness issuesIBMU.S. District Court for the District of ColumbialegalSEC Filings

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Grant Gross

IDG News Service
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