IBM 2012 Annual Report Download - page 113

112 Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
112
In a separate but related proceeding, in March 2011, the Trustee
of the IBM UK Trust was granted leave to initiate a claim before the
High Court in London against IBM UK and one member of the UK
Trust membership, seeking an order modifying certain documents
and terms relating to retirement provisions in IBM UK’s largest
defined benefit plan (the C Plan) dating back to 1983. The trial of
these proceedings began in May 2012 and finished in early June.
On October 12, 2012, the High Court in London issued its ruling,
holding that the 1983 Trust Deeds and Rules should be modified to
allow certain categories of current IBM UK employees who are
members of the C Plan to retire from the age of 60 (rather than from
the age of 63) without actuarial reduction of their defined benefit
pension. In a supplementary ruling on December 13, 2012, the Court
declined to similarly modify the Trust Deeds and Rules for former
employees who were C Plan members and who left the company
prior to retirement. On February 7, 2013, the Court issued an order
agreed to by all parties, under which there will be no appeals of the
October 2012 and December 2012 judgments. As a result of the
October 2012 ruling, IBM recorded an additional pre-tax retirement-
related obligation of $162 million in the third quarter of 2012.
In March 2011, the company announced that it has agreed to
settle a civil enforcement action with the Securities and Exchange
Commission (SEC) relating to activities by employees of IBM Korea,
LG IBM, IBM (China) Investment Company Limited and IBM Global
Services (China) Co., Ltd., during the period from 1998 through
2009, allegedly in violation of the Foreign Corrupt Practices Act of
1977. As part of the settlement, IBM has consented to the entry of
a judgment relating to the books and records and internal control
provisions of the securities laws. IBM has also agreed to pay a total
of $10 million, categorized by the SEC as follows: (i) $5.3 million,
representing profits gained as a result of the conduct alleged in the
SEC’s complaint, (ii) prejudgment interest on that amount of $2.7
million, and (iii) a civil penalty of $2 million. The settlement is subject
to court approval.
The company is a defendant in numerous actions filed after
January 1, 2008 in the Supreme Court for the State of New York,
county of Broome, on behalf of hundreds of plaintiffs. The com-
plaints allege numerous and different causes of action, including for
negligence and recklessness, private nuisance and trespass. Plain-
tiffs in these cases seek medical monitoring and claim damages in
unspecified amounts for a variety of personal injuries and property
damages allegedly arising out of the presence of groundwater con-
tamination and vapor intrusion of groundwater contaminants into
certain structures in which plaintiffs reside or resided, or conducted
business, allegedly resulting from the release of chemicals into the
environment by the company at its former manufacturing and devel-
opment facility in Endicott. These complaints also seek punitive
damages in an unspecified amount.
The company is party to, or otherwise involved in, proceedings
brought by U.S. federal or state environmental agencies under the
Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), known as “Superfund,” or laws similar to
CERCLA. Such statutes require potentially responsible parties to
participate in remediation activities regardless of fault or ownership
of sites. The company is also conducting environmental investiga-
tions, assessments or remediations at or in the vicinity of several
current or former operating sites globally pursuant to permits,
administrative orders or agreements with country, state or local
environmental agencies, and is involved in lawsuits and claims con-
cerning certain current or former operating sites.
The company is also subject to ongoing tax examinations and
governmental assessments in various jurisdictions. Along with many
other U.S. companies doing business in Brazil, the company is
involved in various challenges with Brazilian authorities regarding
non-income tax assessments and non-income tax litigation matters.
These matters include claims for taxes on the importation of com-
puter software. In November 2008, the company won a significant
case in the Superior Chamber of the federal administrative tax court
in Brazil, and in late July 2009, the company received written con-
firmation regarding this decision. The total potential amount related
to the remaining matters for all applicable years is approximately
$575 million. The company believes it will prevail on these matters
and that this amount is not a meaningful indicator of liability.