LATEST ON HP's BRIBERY SCANDAL ……

[Anonymous]

http://www.mercurynews.com/science/ci_14912006?source=rss
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.

[Author]

May 10, 2010 at 9:58 AM