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 user 2010-05-10 at 9:57:46 am Views: 44
  • #23811
    HP investigation sheds light on challenges of the modern businessworld
    Despite President Dmitry Medvedev’s recent pledge to crack down on corruption, legal experts and overseas business advisers say it’s not surprising that a Russian government contract is at the center of a bribery investigation targeting Hewlett-Packard managers in Europe.”It’s extraordinarily difficult to avoid demands for bribes in Russia,” said Alexandra Wrage of TRACE International, a Washington-based group that advises corporations on avoiding foreign graft. “You can do business in Russia profitably, or you can do business in Russia legally, but you can’t very often do both.”

    That won’t let HP or its employees off the hook, according to several legal experts, if the allegations investigated by German and U.S. authorities turn out to be true. But some said the persistence of corruption in some parts of the world underscores why U.S. companies must act aggressively to ensure that employees aren’t paying bribes or kickbacks overseas.Both the U.S. Securities and Exchange Commission and Department of Justice reportedly are looking into the HP case, initiated by German authorities who suspect HP employees paid up to $11 million in kickbacks connected with a 2003 contract to provide computer systems to a Russian government agency.

    Palo Alto-based HP says it is cooperating with authorities and conducting an internal review. In a statement Friday, the company said no senior executives “then or now” had knowledge of what it called “alleged  activities that took place seven years ago in Germany and Russia by regional employees.” Overseas corruption is a particular concern to Silicon Valley companies that have factories and suppliers in Asia and sales operations around the world. HP, like other big tech vendors, draws much of its revenue from outside the United States.Singapore attorney Richard Cassin, who writes a blog about the FCPA and overseas graft, said HP is known for a strong anti-corruption stance.HP’s ethics policies, listed on the company’s website, include employee training and other measures. “We do not bribe,” says one document. “In countries where ethics issues are more likely to arise, we conduct additional training and audits to ensure our standards are met.”

    Still, overseas business experts say demands for bribes are a recurring problem for multinational companies, particularly in developing countries. Russia frequently scores near the bottom of surveys in which corporate executives rank countries on whether their government and business climate are free from corruption.”Russia is a very difficult place to do business,” said Kenn Kurtz, CEO of a San Francisco risk management consulting firm called STEELE.Frustrated executives at Ikea, the Swedish retailer, have complained publicly that officials at Moscow’s electric utility demanded bribes to provide power for newly opened stores. Rather than bow to those demands, Ikea rented diesel generators to produce its own power.Even that effort ran into trouble: Ikea said it learned last year that one of its Russian executives accepted kickbacks from the generator supplier, which overcharged Ikea by almost $200 million.

    “These companies are huge global enterprises and sometimes an individual overseas just goes off the rails,” Cassin said. “It happens, but the company is still responsible for that behavior.”The Wall Street Journal, however, said German court records show the payments continued until 2006. The newspaper identified two suspects as former HP regional officials in Germany and Russia, and a third as a current HP marketing executive in Germany, now on administrative leave. The payments allegedly were made through middlemen and shell companies that submitted seemingly legitimate invoices.

    But even if the suspects acted without the knowledge of HP’s top management, legal experts say the company could still be liable under a U.S. law known as the Foreign Corrupt Practices Act. The law prohibits U.S. corporations, or their representatives, from paying bribes to foreign officials.”Even if senior management doesn’t know about it, that doesn’t give the company a pass,” said John Davis, an FCPA expert at the Miller Chevalier law firm in Washington, D.C.

    In the last five years, authorities in the United States and Western Europe have assigned a higher priority to bribery cases, as some business groups have argued that enforcement helps level the competitive playing field. The volume of investigations, prosecutions and multimillion-dollar fines have all increased.As a result, many big corporations realize they need more than written policies against bribes. Regulators have urged companies to provide employee training, conduct audits and take other steps to prevent illicit deals, said attorney William Barry, an FCPA expert at Richards Kibbe & Orbe in Washington. He said authorities weigh those efforts when considering criminal charges or financial penalties for violations.