As detailed in a plea agreement reached between the DOJ and ZAO Hewlett-Packard A.O. (“HP Russia”), in 1999 the Russian government commenced a project to automate the computer and telecommunications infrastructure of the GPO. In January 2001, it was announced that HP Russia was the winner of the first phase of the project, and in June 2001 the contract was executed with a value of $35,294,000. To secure the contract, HP Russia is alleged to have used various intermediaries with close ties to the Russian government, which the DOJ implies were used to funnel bribes to the Russian officials.
According to the DOJ, HP Russia created a “slush fund” totaling several million dollars from the excess margins derived from an elaborate buy-back structure which inflated the prices of the relevant HP products and concealed the corrupt scheme. First, HP Russia sold the relevant HP products to an approved third-party channel partner (as required by HP Co. internal controls), which in turn sold the products to an intermediary controlled by one Russian government official. Second, HP bought back the very same products from the intermediary at nearly an €8 million markup and paid the channel partner an additional €4.2 million for purported services. Third, HP Russia sold the HP products to the GPO at the inflated prices. The excess profits were spent on travel, cars, jewelry, clothing, expensive watches, swimming pool technology, furniture, household appliances, and other luxury goods for Russian officials.
As described in a deferred prosecution agreement between the DOJ and Hewlett-Packard Polska, SP. Z.O.O. (“HP Poland”), beginning in 2006, an unnamed official responsible for information and technology services (the “Polish Official”) at the Polish National Police agency (“Komenda Glówna Policji” or “KGP”) was tasked with reviewing previous and future technology contracts for the KGP. In October 2006, HP Poland and another global technology company (“Company A”) allegedly invited the Polish Official to attend a conference in San Francisco, California. Officials from HP Poland and Company A paid for dinners, gifts, and sightseeing by the Polish Official, as well as an all-expenses paid trip to Las Vegas during the conference for no legitimate business purpose. In January and February 2007, the Polish Official awarded two contracts to HP Poland on behalf of the Polish government, valued at approximately $4.3 million and $5.8 million, respectively. Around February 2007, the DOJ claims that HP officials and agents offered the Polish Official large cash payments from off-the-books accounts and agreed to pay the Polish Official 1.2% of HP Poland’s net revenue on any contract awarded by KGP.
In March 2007, the Polish Official signed another contract with HP Poland, valuedat approximately $15.8 million. Around this date, an executive from HP Poland is alleged to have delivered a bag filled with $150,000 in cash to the Polish Official’s personal residence. Multiple cash exchanges between the HP Poland executive and the Polish Official were allegedly made in 2007 and 2009, totaling approximately $460,000. In exchange for the payments, the Polish Official awarded three agreements in 2008 worth $32 million and another in 2010 worth $4 million.
According to a non-prosecution agreement between the DOJ and Hewlett-Packard Mexico, S. de R.L. de C.V. (“HP Mexico”), beginning in mid-2008, HP Mexico began discussions with Mexico’s state-owned petroleum company (“Petroleos Mexicanos” or “Pemex”) to sell a suite of HP software packages and licenses (the “BTO Deal”). The DOJ alleges that for HP Mexico to complete the sale, it understood it would be required to retain the services of a Mexican technology consulting company (the “Consultant”). Pemex’s Chief Operating Officer was a former principal of the Consultant and supervised Pemex’s Chief Information Officer—the individual at Pemex primarily responsible for awarding technology contracts.
According to HP Co.’s internal control policies, the company could not partner with the Consultant because it was not an approved channel partner. To circumvent these internal controls, HP Mexico arranged for an approved third-party channel partner to join the transaction as an intermediary (the “Intermediary”) between HP Mexico and the Consultant. HP Mexico is accused of arranging for the Intermediary to receive a portion of the commissions from the sale and to pass along those commissions to the Consultant, after deducting a small percentage as a fee. In December 2008, Pemex awarded HP Mexico the BTO Deal. In February 2009, HP Mexico is alleged to have paid the intermediary approximately $1.7 million in commissions. Thereafter, court documents state that the intermediary transferred $1.41 million to the Consultant, which then paid an entity of Pemex’s Chief Information Officer approximately $125,000.
