HP to pay $108 million over bribery charges

Computer giant Hewlett-Packard will pay more than $108 million to settle federal charges that its foreign subsidiaries used millions of dollars for bribes, slush funds and secret deals in order to secure government contracts.

The schemes involved fraud, expensive gifts and cash bribes in Mexico, Poland and Russia, according to charges from the Justice Department and Securities and Exchange Commission released on Wednesday.

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“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,” Deputy Assistant Attorney General Swartz said in a statement.

Richard Weber, head of the Internal Revenue Service’s criminal investigations unit, said that the case involved “untangling a global labyrinth of complex financial transactions" that HP used to "facilitate bribes to foreign officials.”

The government charged that HP's subsidiary created a $7 million fund to bribe Russian officials in order to secure a $100 million contract with the government, which it saw as the “golden key” to up to $150 million in additional business.

The ”slush fund” was set up through an elaborate system that involved selling HP hardware to an intermediary, buying them back at a markup and then reselling them to the Russian government at an inflated price. Money was transferred through a series of shell companies registered in multiple countries and laundered through bank accounts in places like Lithuania, Switzerland and Austria.

In addition, from 2006 to 2010 the company’s Polish subsidiary allegedly falsified books and records to score contracts with the national police agency. That effort involved more than $600,000 worth of cash bribes and gifts, including bags filled with cash and a trip for a government official to Las Vegas that included a private tour flight over the Grand Canyon.

In Mexico, the company hid a $1.4 million commission to a consultant it hired to help secure a contract with the government-owned petroleum company, Pemex. 

“The misconduct described in the settlement was limited to a small number of people who are no longer employed by the company,” HP Executive Vice President John Schultz said in a statement.

“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.”

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