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 user 2009-10-06 at 11:27:57 am Views: 69
  • #22494

    is demanding that its global network of 154,000 channel partners pay to
    complete a regulatory compliance training program by October 31 or risk
    losing their partner status.

    recently notified some US-based partners of the compliance initiative
    via a faxed letter that described the mandatory compliance requirement
    and a $120 fee “only payable by credit card.” The delivery method,
    combined with the credit card-only terms, set off a bit of a furor
    among solution providers, some of whom said they initially believed the
    faxes to be a hoax.But it’s no scam. HP is demanding that partners
    register for the program, complete a short compliance training module
    with a third-party contractor, review and accept HP’s Partner Code of
    Conduct and complete a questionnaire to assess compliance risk.

    Balsarotti, President, Software To Go – an HP partner, said the ASCII
    Group’s online forum was buzzing with “ticked off” HP resellers as the
    faxes announcing the compliance program started arriving last month.
    The program itself was announced in June, according to HP, but some
    partners say that the faxes were the first they heard about
    it.Balsarotti, whose company is located in Missouri, said partners were
    troubled because “HP is usually such a professional company,” but the
    grainy, faxed correspondence “looks like a scam and it smells like a
    scam.”Risa Stolly, Owner, A-Prompt – a Pennsylvania-based partner, also
    described the communications as “unprofessional.” She said A-Prompt
    “threw the fax in the trash” before learning from her peers that the
    message was a legitimate communication from HP that now appears on the
    company’s partner portal.”We could have communicated this better,” said
    a spokesperson for HP’s Solution Providers Organization—Americas. HP
    will be mailing partners directly with more information about the
    compliance program ahead of the October 31 deadline, the spokesperson

    The compliance effort is apparently aimed at
    preventing everything from bribery prosecutions associated with the US
    Foreign Corrupt Practices Act (FCPA) to gray market movement of
    products aimed at avoiding taxes.”This initiative seeks to protect both
    HP and HP partners by reducing business risk and unnecessary costs,
    penalties and goodwill damage that can result from noncompliant
    behavior, including government sanctions and legal action for
    violations,” wrote Enrique Lores, Senior Vice President, Worldwide
    Solution Partners Organization and Commercial Sales, HP, and Jon Hoak,
    Vice President and Chief Ethics and Compliance Officer, HP, in a fax
    sent to HP partners that was obtained by Crn.com.”Partners that fail to
    comply will face serious consequences, including potential loss of
    status as an HP partner. All HP partners are required to complete this
    program,” the faxed message warns.Integrity Interactive, the Waltham,
    Massachusetts-based company administering the compliance program, will
    receive the entirety of fees from participating partners, according to
    HP. That’s no small amount of money — at $120 per partner from the
    154,000 worldwide partners HP reported having in 2008, the initiative
    would amount to better than $18 million in fees for Integrity
    Interactive should every partner pony up.

    But it seems
    unlikely that HP’s entire channel will participate in the program,
    given the reaction of some smaller partners. Some small solution
    providers that do only several thousand dollars of business with HP
    annually told Channelweb.com that they would rather buy their HP
    products from big box retailers like Office Max and Staples rather than
    pay the $120. They said they often get better pricing for their
    customers from those stores than from distributors.For most larger
    partners, the fee they are being asked to pay isn’t particularly
    troubling—and partners with unspent market development funds from HP
    can pay for the program with that money. Partners contacted by Crn.com
    described the $120 as a “nuisance fee,” but one that they would gladly
    pay if they knew more about the compliance program’s purpose.”It’s the
    principle, not the amount,” said one partner who asked not to be named,
    adding that he felt that HP had not communicated what partners would be
    receiving for their time and money.”They’re getting something back. The
    reason HP partnered with Integrity Interactive is for suppliers to get
    something tangible,” said Richard Cellini, Senior Vice President,
    Business and Legal Affairs, Integrity Interactive. “We keep a
    lock-encrypted PDF of their response. We maintain millions of these
    records for hundreds of companies around the world.”

    said one reason HP was concerned with gray market issues and
    anti-corruption enforcement was that the US government has signaled
    that it will be focusing on high-tech companies for possible violations
    of the FCPA.”Some smaller partners may be scratching their heads, but
    that just shows how much this is needed,” he said. “The US Department
    of Justice has targeted the high-tech industry on anti-bribery laws.
    Whether you’re doing business for yourself or on behalf of a larger
    company like HP, you can’t bribe anyone.”"Routing things in a certain
    way, to avoid taxes and duties, actually lands people in jail. Normally
    the DOJ squeezes individuals to get at companies. But the bribery guys
    want to put individuals in jail,” Cellini said, adding that “98
    percent” of FCPA violations brought to court involve distributors and
    resellers.”It’s essentially the ‘reseller corruption act.’ And it’s not
    the wave of the future, it’s the wave of the present,” he said.


    interpretation of a tough new DOJ attitude towards FCPA violators was
    seconded by Hugh Quinn, Principal, Quinn Forensics – a DC-based
    compliance consultant. Quinn said the DOJ was currently conducting
    about 120 open investigations into possible FCPA violations, a major
    increase in focus on the Carter-era law.”They’ve had more enforcement
    of the FCPA in the past four years than in last 40 years,” he said.
    “They’ve increased their staffing and the biggest area they’re going
    after is third-party vendors. So anything a partner does, the liability
    could go to HP.”

    Quinn said that even the smallest of businesses
    ought to be as concerned with FCPA compliance as larger firms, pointing
    to the September conviction on federal bribery charges of Gerald and
    Patricia Green, a husband and wife who ran film festival and tourism
    businesses together in Los Angeles. The Greens face up to five years in
    prison for each of their FCPA violations.”Most of the people getting
    hit with this FCPA stuff, they’re your next door neighbor. They’re not
    robbing banks,” Quinn said. “And most of the FCPA cases never go to
    trial. They get settled because everybody’s scared to death of
    it.”Participating in compliance programs like Integrity Interactive’s
    can help protect individuals against FCPA charges if an employee or
    business partner violates the law, Quinn said.”I don’t think it’s too
    much to ask,” he said, referring to the $120 fee HP partners are
    required to pay for the program. “It’s a nuisance fee, but if you want
    to play with the big boys, you’ve got to pay it.”I’m pretty sure HP
    doesn’t want to do business with somebody who’s going to sink the ship.
    Look, the best thing in the world is that you get to be CEO of HP,”
    Quinn added. “The worst thing in the world is if you’re CEO of HP and
    the feds put you in handcuffs because one of your resellers violated
    the FCPA.”

    Some partners, however, say they might just walk away
    from their partnership with HP over the compliance initiative. Derek
    Gabriel, Owner, Gabriel Phoenix Communications said his Hawaii-based
    company already pays fees for other compliance programs independent of
    HP.”If you want me to jump through an extra hoop to prove additional
    compliance for you, that’s an expense you should be responsible for. By
    forcing my company to pay for your compliance efforts, you add
    additional costs to do business with you. This compounds the already
    high costs associated with training and certifications to do business
    as an HP partner,” Gabriel told Crn.com in an e-mail exchange.”Last I
    checked, Lenovo, Dell, Xerox, Lexmark and the myriad other major PC,
    printer and network equipment manufacturers don’t charge partners for
    compliance schemes. So to continue to maintain a competitive stance
    with respect to my operating costs, I’ll choose to strengthen my
    business relationship with these other vendors over paying to prove
    compliance with HP programs,” he said.