The US Securities and Exchange Commission and Department of Justice have joined forces to compel the Californian software firm of Hewlett Packard to pay $108 million in fines and other penalties for bribing public officials in Mexico, Poland and Russia.

The US Securities and Exchange
Commission and Department of Justice have joined forces to compel the
Californian software firm of Hewlett Packard to pay $108 million in
fines and other penalties for bribing public officials in Mexico,
Poland and Russia. Regulators in Germany were also involved.

Compliance practices or 'programmes',
as the Americans call them, were lacking in the associate-vetting
area in some cases; this is the area that most experts think of as
the most conducive to corruption.

The US authorities allege (but offer no
proof) that the corruption in question helped to secure $40 millions'
worth of contracts to install hardware at the national police
headquarters in Poland and €35 millions paid by government
prosecutors in Russia for 'purported' services rendered. Officials at
Pemex, Mexico's nationalised petrol company, are also said to have
taken bribes.

Hewlett Packard Russia has been charged
under the US Foreign Corrupt Practices Act. Pursuant to a deferred
prosecution agreement, the department filed a criminal information
charging Hewlett-Packard Poland with breaking the accounting
provisions of the FCPA. Hewlett-Packard Mexico has already signed a
non-prosecution agreement with the US Government pursuant to which it
will forfeit proceeds and admit everything. In total, the three HP
entities will pay $76,760,224 in criminal penalties and forfeiture.
Meanwhile, the US Securities and Exchange Commission has charged
Hewlett Packard $31,472,250 in 'disgorgement,' prejudgment interest
and civil penalties.

The Guardian reports that a Pole called
Thomasz Z, who used to work for Hewlett Packard as an executive, has
been charged with giving $600,000-worth of cash and IT equipment to
the head of police IT. The Polish corruption saga is dated between
2006 and 2010. Hewlett Packard Poland, needless to say, subverted its
own financial crime controls.

Bribery often takes a less direct
route, however. In Mexico, the firm paid more than $1 million in
inflated commissions to a consultant, who then pocketed some of the
cash and paid the rest to a Pemex functionary to seal the relevant
deal. 'Consultant abuse' is a perennial bugbear of the Organisation
for Economic Co-operation and Development, whose job it is to
influence world anti-bribery policy.

The Russian corruption, however, is the
most exciting and elaborate. In 1999, the Russian government
announced a major IT overhaul at the prosecutor-general's office.
That project itself was worth more than $100 million but HP Russia
also viewed it as the 'golden key' to another $100 to $150 million
from various government agencies. To secure this, HP Russia created a
secret slush fund, in part to pay bribes to Russian government
officials.

As admitted, Hewlett Packard Russia
created excess profit margins for the slush fund through an elaborate
buy-back deal structure, whereby it (a) sold hardware and other
products called for in the contract to a Russian "channel
partner," (b) bought those same products back from an
intermediary company at a €8 million mark-up and paid the
intermediary an additional €4.2 million for purported services, and
(c) sold the same products to the prosecutors at the inflated price.

The payments to the intermediary were
then largely transferred through a cascading series of shell
companies—some of which were directly associated with government
officials—registered in the US, the UK, the British Virgin Islands
and Belize. Much of the money that the intermediary paid was
laundered through off-shore bank accounts in Switzerland, Lithuania,
Latvia, and Austria. Portions of the funds were spent on travel, cars
and other luxury goods.

To keep track of these corrupt
payments, the conspirators inside Hewlett Packard Russia kept two
sets of books: secret spreadsheets that detailed the categories of
recipients of the corrupt funds and sanitized versions that hid the
corrupt payments from others outside HP Russia. They also made
off-the-books side-deals. For example, a Hewlett Packard executive
executed a letter agreement to pay €2.8 million in purported
'commission' fees to a UK-registered shell company that was linked to
a director of the Russian government agency responsible for managing
the prosecutors' office project. Hewlett Packard Russia never told
any internal or external auditors (or managers outside Russia) about
the agreement and conducted no 'due diligence' of the shell company.