HP 2013 Annual Report Download - page 159

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
SCDSS terminated the contract with HPSLES for cause, and, in its termination notice, SCDSS asserted
that HPSLES is responsible for all future federal penalties until the CFS System achieves federal
certification, sought an immediate order requiring HPSLES to transfer to SCDSS all work completed
and in progress, and indicated that it intends to seek suspension and debarment of HPSLES from
contracting with the State of South Carolina. HPSLES is disputing the termination as improper and
defective. In addition, on August 9, 2013, HPSLES filed its own affirmative claim within the proceeding
alleging that SCDSS materially breached the contract by its improper termination and that SCDSS was
a primary and material cause of the project delays. On September 4, 2013, the CPO denied SCDSS’s
motion for injunctive relief seeking immediate transfer of the system assets to SCDSS and indicated
that the CPO would address that request following a hearing on the merits. The hearing on the merits
before the CPO commenced on October 21, 2013, and is expected to continue through early January
2014.
India Directorate of Revenue Intelligence Proceedings. On April 30 and May 10, 2010, the India
Directorate of Revenue Intelligence (the ‘‘DRI’’) issued show cause notices to Hewlett-Packard India
Sales Private Ltd (‘‘HPI’’), a subsidiary of HP, seven current HP employees and one former HP
employee alleging that HP underpaid customs duties while importing products and spare parts into
India and seeking to recover an aggregate of approximately $370 million, plus penalties. Prior to the
issuance of the show cause notices, HP deposited approximately $16 million with the DRI and agreed
to post a provisional bond in exchange for the DRI’s agreement to not seize HP products and spare
parts and to not interrupt the transaction of business by HP in India.
On April 11, 2012, the Bangalore Commissioner of Customs issued an order on the products-
related show cause notice affirming certain duties and penalties against HPI and the named individuals
of approximately $386 million, of which HPI had already deposited $9 million. On December 11, 2012,
HPI voluntarily deposited an additional $10 million in connection with the products-related show cause
notice.
On April 20, 2012, the Commissioner issued an order on the parts-related show cause notice
affirming certain duties and penalties against HPI and certain of the named individuals of
approximately $17 million, of which HPI had already deposited $7 million. After the order, HPI
deposited an additional $3 million in connection with the parts-related show cause notice so as to avoid
certain penalties.
HPI filed appeals of the Commissioner’s orders before the Customs Tribunal along with
applications for waiver of the pre-deposit of remaining demand amounts as a condition for hearing the
appeals. The Customs Department has also filed cross-appeals before the Customs Tribunal. On
January 24, 2013, the Customs Tribunal ordered HPI to deposit an additional $24 million against the
products order, which HPI deposited in March 2013. The Customs Tribunal did not order any
additional deposit to be made under the parts order. In December 2013, HPI filed applications before
the Customs Tribunal seeking early hearing of appeals as well as the extension of the stay already
granted until final disposition of the appeals. These applications are currently pending before the
Customs Tribunal.
Russia GPO and Other FCPA 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
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