HP Russian Subsidiary Pleads Guilty, Fined $58.8M For Violating U.S. Anti-Bribery Law

A Russian subsidiary of Hewlett-Packard Co. pleaded guilty in federal court in San Jose today to violating a U.S. anti-bribery law and was sentenced to pay a $58.8 million fine.

The fine was part of a package of $108 million in criminal and civil penalties announced by the U.S. Justice Department and Palo Alto-based HP in April to resolve allegations of violations of the U.S. Foreign Corrupt Practices Act by the technology company’s Russian, Polish and Mexican subsidiaries.

The Russian subsidiary, ZAO Hewlett-Packard A.O., also known as HP Russia, pleaded guilty today before U.S. District Judge Lowell Jensen to four counts of violating anti-bribery provisions and record-keeping requirements of the law.

Jensen then levied the $58.8 million fine, as provided in a plea agreement that prosecutors and the subsidiary filled in his court on April 9.

The Foreign Corrupt Practices Act makes it a crime to pay money to foreign government officials to obtain contracts and also requires certain internal accounting practices and controls.

In the plea agreement, HP Russia acknowledged it created a multimillion dollar slush fund, at least part of which was used to bribe officials who awarded the company a $45 million contract with the Russian prosecutor general’s office.

In other agreements announced on April 9, the company’s Polish subsidiary, Hewlett-Packard Polska, acknowledged violating accounting controls and agreed to pay a $15.5 million penalty. The acknowledgement was made in a document known as a deferred prosecution agreement, filed by prosecutors in federal court in San Jose.

The Justice Department reached an out-of-court settlement with Hewlett-Packard Mexico, in which that subsidiary acknowledged violating accounting requirements and agreed to pay a $2.5 million fine.

Additionally, in a settlement of a related civil proceeding initiated by the U.S. Securities and Exchange Commission, HP agreed to pay $31.5 million to resolve allegations of FPCA violations, thus bringing the total fines and penalties to more than $108 million.

In a statement today, Principal Deputy Assistant U.S. Attorney General Marshall Miller said, “In a brazen violation of the FCPA, Hewlett-Packard’s Russia subsidiary used millions of dollars in bribes from a secret slush fund to secure a lucrative government contract.

“Even more troubling was that the government contract up for sale was with Russia’s top prosecutor’s office,” Miller said.

An HP spokeswoman referred requests for comment to a statement issued in April by company General Counsel John Schultz.

In that statement, Schultz said, “The misconduct described in the settlement was limited to a small number of people who are no longer employed by the company.

“HP fully cooperated with both the Department of Justice and the Securities and Exchange Commission in the investigation of these matters,” Schultz said.

Julia Cheever, Bay City News

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