Enforcement Action

 

Docket or Case Number:    5:14-cr-00201

Court:    N.D. California

Initiation Date:    04/09/2014  Information

Prosecuting Agency:    US Department of Justice

Name of Prosecuting Attorneys:   

  • Melinda Haag, United States Attorney
  • Adam A. Reeves, Assistant United States Attorney
  • Jeffrey H. Knox, Chief, Fraud Section, Criminal Division
  • Ryan Rohlfsen, Trial Attorney, Fraud Section, Criminal Division
  • Jason Linder, Trial Attorney, Fraud Section, Criminal Division

Assisting Agencies:    U.S. Securities and Exchange Commission , Department of Justice- Criminal Division’s Office of International Affairs , Germany's Dresden Public Prosecutors Office , Polish Anti-Corruption Bureau , Polish Appellate Prosecutor’s Office

Type of Action:    DOJ Criminal Proceeding

Origin of the Proceeding:    Foreign investigation

Whistleblower:    Unknown

Case Status:    Resolved


Summary

ZAO Hewlett-Packard A.O. ("HP Russia"), was a wholly owned subsidiary of Hewlett-Packard company ("HP co.") operating and incorporated in the Russian Federation. HP Co. was a technology company headquartered in Palo Alto, California, and incorporated in Delaware. HP was a global provider of personal computing devices, information technology infrastructure, and imaging and printing products and services.

According to the criminal information, in 1999, the Russian government announced a project to automate the computer and telecommunications infrastructure of its Office of the Prosecutor General of the Russian Federation (GPO). The project itself was worth more than $100 million (the first phase valued at approximately $35 million), but HP Russia viewed it as the “golden key” that could unlock the door to another $100 to $150 million dollars in business with Russian government agencies. To secure a contract for the first phase of the project, HP Russia executives created a secret slush, which by 2003 totaled approximately €8 million (about $10 million in U.S. dollars at then-prevailing exchange rates), at least part of which was intended for bribes, kickbacks, and other improper payments.

On April 9, 2014, the DOJ filed an information against HP Russia, charging the company with conspiracy to violate the anti-bribery, books and records and internal controls provisions, and substantive violations of the anti-bribery, internal controls, and books and records provisions of the FCPA. At the same time, HP Russia entered into a plea agreement with the DOJ, agreeing to pay a $58,772,250 fine.

In a related action, HP Co. consented to the entry of an administrative cease and desist order. HP Co. shall cease and desist from violating the internal controls and books and records provisions of the FCPA. HP Co. agreed to pay disgorgement of $29,000,000 and prejudgment interest of $5,000,000. $2,527,750 of HP Co.'s disgorgement obligation will be satisfied by HP Co.'s payment of $2,527,750 in forfeiture as part of HP Mexico’s non-prosecution agreement with the DOJ.

Country(ies) involved:    Russia

Sanction to Bribe Ratio:    $58,773,850 / $10,000,000 = 587.74 %

Sanction to Revenue Ratio:    $58,773,850 / $38,533,989 = 152.52 %

Sanction to Profit Ratio:    N/A

Number of Related Enforcement Actions (Including This Enforcement Action):    4

Country(ies) involved:    Mexico, Poland, Russia

Total $ Bribery Payments:    $14,510,000

Total $ Revenue Generated from Bribery:    $104,533,989

Total $ Profit Earned or Expenses Avoided from Bribery:    $29,000,000

Total $ Monetary Sanctions:    $108,224,074

Sanction to Bribe Ratio:    $108,224,074 / $14,510,000 = (745.86 %)

Sanction to Revenue Ratio:    $108,224,074 / $104,533,989 = (103.53 %)

Sanction to Profit Ratio:    $108,224,074 / $29,000,000 = (373.19 %)

Name:    ZAO Hewlett-Packard A.O.

Place of Incorporation:    Russian Federation

HQ Country(ies):    Russian Federation

Entity Type:    Subsidiary

FCPA Claims:    Anti-Bribery, Aiding and Abetting/Causing (18 U.S.C. § 2, 15 U.S.C. §§ 78dd-1, 78dd-2, and/or 78dd-3) ; Anti-Bribery, Conspiracy (18 U.S.C. 371) ; Books & Records, Conspiracy (18 U.S.C. 371) ; Internal Controls, Conspiracy (18 U.S.C. 371) ; Internal Controls, Aiding and Abetting/Causing (18 U.S.C. § 2, 15 U.S.C. § 78m (b)(2)(B), and/or 15 U.S.C. § 78m(b)(5)) ; Books & Records , Aiding and Abetting/Causing (18 U.S.C. § 2, 15 U.S.C. § 78m (b)(2)(A), and/or 15 U.S.C. § 78m(b)(5)) ; Anti-Bribery, Primary, Other (15 U.S.C. § 78dd-3) ; Books & Records, Primary, Knowing Violation (15 U.S.C. § 78m (b)(5)) ; Internal Controls, Primary, Knowing Violation (15 U.S.C. § 78m(b)(5)) ; Books & Records, Primary, Issuer [Willful] (15 U.S.C. § 78m (b)(2)(A); 15 U.S.C. § 78ff(a)) ; Internal Controls, Primary, Issuer [Willful] (15 U.S.C. § 78m (b)(2)(B); 15 U.S.C. § 78ff(a))

Related Claims:    N/A

Statutory Basis for FCPA Jurisdiction:    Foreign Nationals and Entities ; Conspirator ; Aider & Abettor/Cause/Control Person ; Person (Books & Records, Internal Controls)

Period of Bribery:   2000 - 2007

Total Bribery Payments:    $10,000,000

Total Revenue Generated from Bribery:    $35,294,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Russia

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Russian government agency; Department of Affairs of the President of the Russian Federation

Defendant-Related Entities Involved in the Misconduct:    N/A

Third-Party Intermediary:    N/A

Type of Bribe:   Money

Cash, Wire or Check:    Wire Transfer

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Bribes to Russian government officials

Period of Bribery:   2000 – 2007

Total Bribery Payments:    $10,000,000

Total Revenue Generated from Bribery:    $35,294,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Russia

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Russian government agency; Department of Affairs of the President of the Russian Federation;

Defendant-Related Entities Involved in the Misconduct:    N/A

Third Party Intermediary:    N/A

Type of Bribe:   Money

Cash, Wire or Check:    Wire Transfer

Purpose of Bribe:    Obtain/retain business

Misconduct by Subsidiary?  Yes


Parent(s):   Hewlett-Packard Company

Subsidiary:  ZAO Hewlett-Packard A.O.

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Indirect
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    No

Subsidiary:  Hewlett-Packard GmbH

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    No

M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     No

Re: ZAO Hewlett-Packard A.O.

  • Inadequate internal controls or auditing

Mitigating Factors Referenced by the Government (Company Defendants):

Defendant Self-Report Cooperation Voluntary Remedial Measures Misconduct Limited to Low Level Individuals Other factors
ZAO Hewlett-Packard A.O.      

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
ZAO Hewlett-Packard A.O.    

Total Monetary Sanctions for the Action:    $58,773,850

Case Status:    Resolved


Disposition:    Plea Agreement

Date of Disposition:    04/09/2014

ZAO Hewlett-Packard A.O.

—  Total Monetary Sanctions for Defendant:    $58,773,850

—  Organizational Probation:    None

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Self-reporting

—  Admission of Guilt/Acceptance of Responsibility:    Yes

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