HP 2013 Annual Report Download - page 160

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
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
German PPO has issued an indictment of four individuals, including one current and two former HP
employees, on charges including bribery, breach of trust and tax evasion. The German PPO has also
requested that HP be made an associated party to the case, and, if that request is granted, HP would
participate in any portion of the court proceedings that could ultimately bear on the question of
whether HP should be subject to potential disgorgement of profits based on the conduct of the indicted
current and former employees.
The U.S. Department of Justice and the SEC have been conducting an investigation into the
Russia GPO deal and potential violations of the Foreign Corrupt Practices Act (‘‘FCPA’’). These U.S.
enforcement agencies, as well as the Polish Central Anti-Corruption Bureau, are also conducting
investigations into potential FCPA violations by an employee of Hewlett-Packard Polska Sp. z o.o., an
indirect subsidiary of HP, in connection with certain public-sector transactions in Poland. In addition,
the same U.S. enforcement agencies are conducting investigations into certain other public-sector
transactions in Russia, Poland, the Commonwealth of Independent States, and Mexico, among other
countries.
HP is cooperating with these investigating agencies. In addition, HP is in advanced discussions with
the U.S. enforcement agencies to resolve their investigations.
Under the FCPA, a person or an entity could be subject to fines, civil penalties of up to $725,000
per violation and equitable remedies, including disgorgement of profits, pre-judgment interest and other
injunctive relief. In addition, criminal penalties could range from the greater of $25 million per
violation or twice the gross pecuniary gain or loss from the violation.
ECT Proceedings. In January 2011, the postal service of Brazil, Empresa Brasileira de Correios e
Te l ´ egrafos (‘‘ECT’’), notified an HP subsidiary in Brazil (‘‘HP Brazil’’) that it had initiated
administrative proceedings 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 allegedly coordinated their bids and fixed results
for three ECT contracts in 2007 and 2008. In late July 2011, ECT notified HP Brazil it had decided to
apply the penalties against HP Brazil and suspend HP Brazil’s right to bid and contract with ECT for
five years, based upon the evidence before it. In August 2011, HP Brazil appealed ECT’s decision. In
April 2013, ECT rejected HP Brazil’s appeal, and the administrative proceedings were closed with the
penalties against HP Brazil remaining in place. In parallel, in September 2011, HP Brazil filed a civil
action against ECT seeking to have ETC’s decision revoked. HP Brazil also requested an injunction
suspending the application of the penalties until a final ruling on the merits of the case. The court of
first instance has not issued a decision on the merits of the case, but it has denied HP Brazil’s request
for injunctive relief. HP Brazil appealed the denial of its request for injunctive relief to the
intermediate appellate court, which issued a preliminary ruling denying the request for injunctive relief
but reducing the length of the sanctions from five to two years. HP Brazil appealed that decision and,
in December 2011, obtained a ruling staying enforcement of ECT’s sanctions until a final ruling on the
merits of the case. HP expects the court of first instance to issue a decision on the merits of the case
before the end of the first six months of calendar year 2014 and any subsequent appeal on the merits
to last several years.
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