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HP hit with US$108 million corruption fine

WASHINGTON, D.C.: Hewlett-Packard (HP) subsidiaries in Russia, Poland and Mexico have admitted bribery charges and been fined over US$76 million by the U.S. Department of Justice (DoJ) and Securities & Exchange Commission (SEC).

HP has also been penalized an additional US$31.4 million for contravening the U.S. Foreign Corrupt Practices Act bringing the total to more than US$108 million. The DoJ said HP provided extensive cooperation in the investigation.

According to court documents, HP Russia admitted bribing government officials to secure a large technology contract with the office of the prosecutor general of the Russian Federation. HP subsidiaries in Poland and Mexico acknowledged similar behavior relating to contracts with Poland's national police agency and Mexico's state-owned petroleum company.

Russias prosecutor generals office"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," said DoJ deputy assistant attorney general Bruce Swartz.

In 1999, the Russian government announced a project to automate the computer and telecommunications infrastructure of its prosecutor general's office (right). To secure a contract for the first phase of a project that local HP executives thought could be worth as much as US$250 million, they structured the deal to create a secret slush fund of several million dollars from which to pay Russian officials.

Payments were transferred through a series of shell companies and laundered through offshore bank accounts in Switzerland, Lithuania, Latvia and Austria. The DoJ says some of the money was spent on travel, cars, jewelry, clothing, expensive watches, swimming pool technology, furniture, household appliances and other luxury goods.

Meanwhile in Poland, the HP subsidiary provided more than US$600,000 in cash, gifts and a trip to 'Vegas to the director of Information and Technology at the country's National Policy Agency. To secure contracts with Pemex, Mexico's oil company, HP agreed to pay a third-party consultant with ties to Pemex senior executives a US$1.41 million commission. Subsequently, one of the officials was paid $125,000 said the DoJ.

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