HP to pay $US108 million for overseas bribery and corruption

Employees in Russia, Poland and Mexico were accused of bribing local officials

Hewlett-Packard will pay $US108 million in penalties after subsidiaries in Russia, Poland and Mexico were found to have paid bribes to win business, the US Department of Justice said.

An international subsidiary of HP has agreed to plead guilty to violating the US Foreign Corrupt Practices Act and admit to its role in bribing Russian officials to secure a big contract there, the US Department of Justice said.

The US is also entering into "criminal resolutions" with HP subsidiaries in Poland and Mexico, relating to contracts with Poland's national police agency and Mexico's state-owned petroleum company, the DOJ said.

The HP entities will pay a total of $US77 million in criminal penalties and forfeiture related to those dealings. HP has also reached a deal with the US Securities and Exchange Commission that will cost it a further $US31 million.

The subsidiaries created a "slush fund" for bribe payments and set up "an intricate web of shell companies and bank accounts" to launder money, Deputy Assistant Attorney General Bruce Swartz said in a statement.

HP said it had cooperated with the investigations.

"The misconduct described in the settlement was limited to a small number of people who are no longer employed by the company," John Schultz, HP's general counsel, said in a statement.

The investigation had been ongoing for some time, and HP said last month it was close to resolving the matter.

The Russian dealings date back to 1999, when the government there announced a project to automate the IT systems at the Office of the Prosecutor General of the Russian Federation -- essentially Russia's equivalent of the DOJ.

The project was worth more than $100 million, and employees at HP Russia structured the deal to include a fund of several million dollars, at least part of which was intended as bribes for Russian officials, the DOJ said.

The DOJ acknowledged HP's "extensive cooperation," and HP said it would set up certain compliance and reporting programs.

It's not the only company to have run into trouble doing business overseas. IBM and Oracle in the past have also reported potential violations of the Foreign Corrupt Practices Act.

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com

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James Niccolai

IDG News Service
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