HP Russia Resolves Foreign Bribery Charges Involving Illegal Slush Fund

April 22, 2014 — The U.S. Foreign Corrupt Practices Act (FCPA) seeks to create an even marketplace across the globe so that honest competition among businesses can thrive. To redress the inequity caused by businesses willing to bribe foreign government officials in an effort to increase profits, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established a whistleblower program. Under the program, tipsters who notify the U.S. Securities and Exchange Commission (SEC) about FCPA violations are entitled to significant rewards.

HP and Three Foreign Subsidiaries to Pay More Than $100 Million to Settle FCPA Investigations

Three foreign subsidiaries of Hewlett-Packard Company (HP Co.), the California technology company, have resolved criminal charges involving the companies’ bribery of foreign officials in an effort to obtain government contracts: ZAO Hewlett-Packard A.O. (HP Russia); Hewlett-Packard Polska, Sp. Z o.o. (HP Poland); and Hewlett-Packard Mexico, S. de R.L. de C.V. (HP Mexico). Together, the three HP subsidiaries will pay more than $76 million. HP Co. has settled related SEC charges concerning FCPA violations for an additional $31 million in disgorgement and prejudgment interest.
The probe in Russia centered around a $100 million update to the computer and telecommunications systems of the Office of the Prosecutor General of the Russian Federation (GPO) that the Russian government announced in 1999. Focused on obtaining the contract for phase one of the project, worth more than $48 million, HP Russia executives and other company employees created a secret slush fund containing several million dollars, a portion of which was to be used for paying bribes to key government officials in Russia.
The system created for paying the bribes was quite elaborate and involved intermediate companies, foreign shell entities, money laundering in off-shore bank accounts and bribes paid in luxury goods and services. Those involved at HP Russia maintained separate sets of books — one that memorialized which government officials received which bribe payments and another “clean” set of books that hid the foreign bribery scheme from anyone outside HP Russia. In addition, the HP Russia conspirators made side agreements with shell companies linked to interested Russian officials, which agreements were kept off even the secret set of books.
The settlement also resolves the investigation into FCPA violations by HP Poland between 2006 and 2010. HP Poland showered luxury gifts and bags of money worth more than $600,000 on the Director of Information and Communications Technology with Komenda G³ówna Policji (KGP), the Polish National Police agency, in an effort to secure business with that agency. To ensure that its bribery payments remained secret, HP Poland communicated with the Polish official on prepaid mobile phones and anonymous email accounts.
Also settled is the probe into HP Mexico’s efforts to secure a contract with Pemex, Mexico’s state-owned petroleum company. To obtain that business, reports the DOJ, HP Mexico paid a $1.41 million “commission” to a consultant with connections to Pemex’s senior level executives. To conceal the arrangement, HP actually paid a pre-approved channel partner, which paid the consultant, who paid the Pemex officials.

Informants Tip Off SEC to Foreign Bribery Scams

The qui tam lawyers at Waters & Kraus have earned their success in representing whistleblowers willing to collaborate with the government. We know that when jobs are scarce, it can be especially difficult to notify the SEC about an employer’s FCPA violations. Our experienced lawyers are devoted to protecting their clients’ interests. Contact us by email or call our FCPA attorneys at 855.784.0268 when you’re ready to team up against illegal foreign bribery.

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