HP 2011 Annual Report Download - page 154

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 18: Litigation and Contingencies (Continued)
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
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 General Prosecutor’s Office of the Russian
Federation. The approximately 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.
ECT Proceedings. In January 2011, the postal service of Brazil, Empresa Brasileira de Correios e
Te l ´ egrafos (‘‘ECT’’), notified HP that it had initiated administrative proceedings against an HP
subsidiary in Brazil (‘‘HP Brazil’’) to consider whether to suspend HP Brazil’s right to bid and contract
with ECT related to alleged improprieties in the bidding and contracting processes whereby employees
of HP Brazil and employees of several other companies coordinated their bids for three ECT contracts
in 2007 and 2008. In late July 2011, ECT notified HP it had decided to apply the penalties against HP
Brazil, suspending HP Brazil’s right to bid and contract with ECT for five years, based upon the
evidence before it. In August 2011, HP filed petitions with ECT requesting that the decision be
revoked and seeking injunctive relief to have the application of the penalties suspended until a final,
non-appealable decision is made on the merits of the case. HP is currently awaiting a response from
ECT on both petitions. Because ECT did not rule on the substance of HP’s petitions in a timely
manner, HP filed a lawsuit seeking similar relief from the court. The court of first instance has not
decided the merits of HP’s lawsuit, but has denied HP’s request for injunctive relief suspending
application of the penalties pending a final, non-appealable decision on the merits of the case. HP has
appealed the denial of its request for injunctive relief, and that appeal is pending before the
intermediate appellate court. The reporting judge assigned by the intermediate appellate court has
issued a preliminary ruling denying the request for injunctive relief and reducing the length of the
sanctions from five to two years. A decision by the intermediate appellate court is expected in early
2012.
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