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Government expands HP bribery probe

The DOJ and SEC widen investigation into whether Hewlett-Packard subsidiary paid bribes in Russia to help win multimillion dollar contract.

The U.S. government has widened its probe into possible bribes paid by Hewlett-Packard to help it capture a lucrative contract in Russia.

Officials in the U.S., Germany, and Russia have been investigating allegations that current and former employees of HP engaged in bribery, embezzlement, and tax evasion in connection with a business deal between Hewlett-Packard ISE GmbH, a former HP German subsidiary, and the chief public prosecutor's office in Russia, according to an SEC document filed by HP on Thursday (see Note 16 under Russia GPO and Related Investigations).

According to the allegations, the HP subsidiary paid bribes totaling $10.9 million to win a $44.5 million contract stretching from 2001 to 2006 to set up an IT network for the Russian prosecutor's office. Looking into the transaction, known as the Russia GPO deal, the Justice Department and the Securities and Exchange Commission are trying to determine if HP violated the Foreign Corrupt Practices Act (FCPA), which specifically covers bribes paid to foreign government officials.

But now the feds are reaching beyond their initial investigation. The DOJ and SEC recently requested information from HP on certain government and quasi-government deals in Russia and its Commonwealth of Independent States region dating back to 2000.

An HP spokeswoman told The Wall Street Journal that investigators were "primarily" focused on the Russia GPO deal, but that they've "now expanded their investigations beyond that particular transaction." She added that HP "has been fully cooperating with the investigating authorities."

If found guilty of violating the FCPA, HP could be subject to fines, civil penalties of up to $500,000 per violation, and other remedies. Criminal penalties could also cost the company $2 million per violation or twice the financial gain of the violation itself, whichever number is higher.

The investigation was initially launched by officials in Germany and Russia and then soon joined by the DOJ and SEC. HP first learned of the probe last December when it was served with a series of search warrants. The company's offices in Moscow were also raided by Russian investigators this past April. That was followed by the arrest of three people who had worked for HP and were said to be the focus of the investigation.