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HP to pay $55 million to settle kickback allegations

Company's payment will close a Justice Department investigation into an alleged kickback scheme over government contracts.

Hewlett-Packard has agreed to pay the U.S. government $55 million to settle charges that it paid kickbacks to technology partners for recommending HP products to federal agencies.

This final agreement, announced Monday by the Department of Justice, follows a tentative settlement reached earlier this month in which HP agreed in principle to resolve the case. The settlement closes the book on the DOJ's allegations that HP defrauded the General Services Administration (GSA) and other government agencies by paying "influencer fees" to third-party vendors.

"Contractors must deal fairly with the government when doing business with federal agencies," Tony West, assistant attorney general for the civil division of the Department of Justice, said in the statement. "As this case demonstrates, we will take action against those who seek to taint the government procurement process with illegal kickbacks."

The case stretches back to 2004 when two whistleblowers--Norman Rille, then a senior manager with Accenture, and Neal Roberts, a partner at PricewaterhouseCoopers--filed a civil complaint alleging that HP had doled out kickbacks. The suit, which also included Sun Microsystems and Accenture, was launched under provisions of the False Claims Act (PDF) in which private citizens can file actions regarding fraud on behalf of the U.S. and share in any money recovered.

In 2007, the DOJ joined the investigation and charged that the defendants used affiliate relationships "to enrich themselves through a kickback scheme."

The settlement also resolves charges that a 2002 contract between HP and the GSA was falsely priced because HP failed to provide complete information during negotiations with the government. At the time, HP contracted with the GSA to sell computer hardware and software to various federal agencies. Under regulations, HP was required to tell the GSA how it conducted business in the private sector to help the government better negotiate a fair price. In 2007, HP revealed that it had not complied with all the regulations, leading to a GSA audit that found the contract "defectively priced."

In response to the settlement, HP issued the following statement:

"HP denies engaging in any illegal conduct in connection with these matters. We believe it is in the best interest of our stakeholders to resolve the matter and move beyond this issue."