HP 2007 Annual Report Download - page 153

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
products. Seagate has agreed to indemnify HP with respect to one patent; HP has requested but not received indemnification
from Seagate with respect to the second. Pre-trial discovery is ongoing. A claim construction hearing was held on March 30-
31, 2004; the court issued its ruling on August 10, 2005. No trial date has been set.
The United States of America, ex rel. Norman Rille and Neal Roberts v. Hewlett-Packard Company, et al. In 2004, two
private individuals filed a civil “qui tam” complaint under the False Claims Act in the United States District Court for the
Eastern District of Arkansas containing generalized allegations that HP and several other companies participated in an
industry-wide practice of using partnership and alliance programs to make improper payments and cause the submission of
false claims in connection with contracts to provide products and services to the federal government. On April 12, 2007, the
U.S. Department of Justice intervened in the qui tam action and filed a complaint against HP (and several other companies in
separate actions) on behalf of the United States containing allegations that HP violated the False Claims Act and the Anti-
Kickback Act of 1986 by providing millions of dollars in kickbacks to its alliance partners, including “influencer fees” and
“new business opportunity rebates.” The U.S. complaint further alleges that HP violated the False Claims Act and the Anti-
Kickback Act, breached its federal government contracts, induced the federal government to make payments to HP to which
HP was not entitled to receive under those contracts, and was unjustly enriched by expressly or impliedly making false
statements, records or certifications to the federal government that it complied with and would continue to comply with the
Anti-Kickback Act and by submitting claims to the government that allegedly were inflated because they included the
amounts of the influencer fees and new business opportunity rebates. The U.S. complaint seeks treble damages plus civil
penalties in connection with the alleged violations of the False Claims Act, double damages plus civil penalties in connection
with the alleged violations of the Anti-Kickback Act and disgorgement of profits earned in connection with the breach of
contract and unjust enrichment claims.
Leak Investigation Proceedings. As described below, HP is or has been the subject of various governmental inquiries
concerning the processes employed in an investigation into leaks of HP confidential information to members of the media
that concluded in May 2006:
• In August 2006, HP was informally contacted by the Attorney General of the State of California requesting
information concerning the processes employed in the leak investigation. On December 7, 2006, HP announced that
it has entered into an agreement with the California Attorney General to resolve civil claims arising from the leak
investigation, including a claim made by the California Attorney General in a Santa Clara County Superior Court
action filed on December 7, 2006 that HP committed unfair business practices under California law in connection
with the leak investigation. As a result of this agreement, which includes an injunction, the California Attorney
General will not pursue civil claims against HP or its current and former directors, officers and employees. Under
the terms of the agreement, HP paid a total of $14.5 million and agreed to implement and maintain for five years a
series of measures designed to ensure that HP’ s corporate investigations are conducted in accordance with California
law and the company’ s high ethical standards. Of the $14.5 million, $13.5 million has been used to create a Privacy
and Piracy Fund to assist California prosecutors in investigating and prosecuting consumer privacy and information
piracy violations, $650,000 was used to pay statutory damages and $350,000 reimbursed the California Attorney
General’ s office for its investigation costs. There was no finding of liability against HP as part of the settlement.
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