HP 2010 Annual Report Download - page 153

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 18: Litigation and Contingencies (Continued)
cause notice to HPI and three current HPI employees alleging that HP failed to pay customs
duties on the appropriate value of recovery CDs containing Microsoft operating systems and
seeking to recover approximately $5.3 million, plus penalties. HP has deposited a total of
approximately $16.7 million with the DRI and agreed to post a provisional bond in exchange for
the DRI’s agreement not to seize HP products and spare parts and not to interrupt the
transaction of business by HP in India.
• On June 17, 2010, the DRI issued show cause notices to HPI and two current HPI employees
regarding non-inclusion of the value of software contained in the products imported from third
party original design manufacturers. The total amount of the alleged unpaid customs duties
relating to such software, including the interest proposed to be demanded under these notices, is
approximately $130,000, which amount HPI has deposited with the DRI. The DRI is also
seeking to impose penalties.
• On October 1, 2010, in connection with an existing DRI investigation commenced against SAP
AG, the DRI issued a show cause notice to HPI alleging underpayment of customs duties
related to the importation of certain SAP software. The amount of the alleged duty differential
is approximately $38,000, which amount has been deposited with the DRI. The DRI is also
seeking to impose interest and penalties.
HP intends to contest each of the show cause notices through the judicial process. HP has responded
or is in the process of responding to the show cause notices.
Russia GPO and Related Investigations. The German Public Prosecutor’s Office (‘‘German PPO’’)
has been conducting an investigation into allegations that current and former employees of HP engaged
in bribery, embezzlement and tax evasion relating to a transaction between Hewlett-Packard
ISE GmbH in Germany, a former subsidiary of HP, and the Chief Public Prosecutor’s Office of the
Russian Federation. The A35 million transaction, which was referred to as the Russia GPO deal,
spanned the years 2001 to 2006 and was for the delivery and installation of an IT network.
The U.S. Department of Justice and the SEC have also been conducting an investigation into the
Russia GPO deal and potential violations of the Foreign Corrupt Practices Act (‘‘FCPA’’). Under the
FCPA, a person or an entity could be subject to fines, civil penalties of up to $500,000 per violation
and equitable remedies, including disgorgement and other injunctive relief. In addition, criminal
penalties could range from the greater of $2 million per violation or twice the gross pecuniary gain or
loss from the violation.
In addition to information about the Russia GPO deal, the U.S. enforcement authorities have
requested (i) information related to certain other transactions, including transactions in Russia, Serbia
and in the Commonwealth of Independent States (CIS) subregion dating back to 2000, and (ii)
information related to two former HP executives seconded to Russia and to whether HP personnel in
Russia, Germany, Austria, Serbia, the Netherlands or CIS were involved in kickbacks or other improper
payments to channel partners, or state owned or private entities.
HP is cooperating with these investigating agencies.
In addition, as described below, HP is involved in stockholder derivative litigation arising from the
Russia GPO deal, the related investigations and other matters commenced against current and former
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