SEC charges IBM employees for bribes in China, Korea

International Business Machines Corp. (IBM) has agreed to pay the Securities and Exchange Commission (SEC) $10 million to settle civil charges that its employees bribed government officials from South Korea and China.

The agreement would draw to a close a suit the SEC filed against IBM, which alleges IBM employees provided cash payments, improper gifts and improper travel and entertainment to the officials. The proposed settlement still is subject to approval of the court.

In the suit, filed with the U.S. District Court for the District of Columbia, the SEC alleged the bribes were made with the goal being to secure the sale of IBM products in those countries.

The SEC claims IBM employees spent roughly $207,000 to bribe South Korean government officials from 1998 to 2003, and that from "at least" 2004 to early 2009 more than 100 IBM China employees were engaged in "a widespread practice" of providing trips, entertainment and improper gifts to Chinese government officials.

Among the gifts provided were free personal computers for government workers. The suit details several alleged payments made by IBM managers to government employees, as envelopes stuffed with tens of thousands of dollars of cash were delivered in parking lots.

The SEC argues that IBM lacked sufficient internal controls designed to prevent or detect such violations, despite having policies in place prohibiting bribery.

"Deficient internal controls allowed employees of IBM's subsidiaries and joint venture to use local business partners and travel agencies as conduits for bribes or other improper payments," the SEC said.

The agency also charges that IBM failed to keep books and records that accurately captured the improper payments. Instead, the bribes and improper gifts were listed as legitimate business expenses.

Under the proposed settlement, IBM neither admits nor denies the accuracy of the charges.