HP unit pleads guilty to bribing Russian officials

A subsidiary of Hewlett-Packard has admitted violating the U.S. Foreign Corrupt Practices Act by bribing Russian officials to win a contract with the Office of the Prosecutor General of the Russian Federation.

ZOA Hewlett-Packard, the company’s Russian unit, paid millions of dollars from a secret fund to bride Russian government officials while pursing the contract, which had a first stage value of €35 million (US$30 million at the time) and was valued in total at $100 million. The U.S. District Court for the Northern District of California ordered HP to pay almost $59 million in fines related to the bribery.

The scheme worked like this: HP Russia sold the products required in the contract to a reseller partner in Russia, then it bought the products back at a nearly €8 million mark up with an additional €4.2 million in services tacked onto the bill. Then, the same goods were sold to the Office of the Prosecutor General of the Russian Federation at the increased price.

“The payments to the intermediary were then largely transferred through multiple layers of shell companies, some of which were directly associated with government officials,” the U.S. Attorney’s office said in a statement. “Proceeds from the slush fund were spent on travel services, luxury automobiles, expensive jewelry, clothing, furniture and various other items.”

The bribery was not disclosed to HP officials in the U.S., according to documents.

The company was keen to win the work because it expected additional contracts from other Russian government agencies, including the Ministry of Justice and Supreme Court, could follow, according to a plea agreement reached between HP and the U.S. Government.

Marshall L. Miller, principal assistant attorney general of the Justice Department’s criminal division, said an especially troubling aspect of the case was that it involved Russia’s top prosecutor’s office.

“Tech companies, like all companies, must compete on a level playing field, not resort to secret books and sham transactions to hide millions of dollars in bribes,” he said in a statement.

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