Kickbacks

The ongoing investigation into a suspicious contract signed between Hewlett-Packard and Russian law enforcement agencies widened this week, as the US Securities and Exchange Commission (SEC) joined German and Russian authorities in investigating whether employees of the California-based computer giant paid millions of euros in bribes to win the contract.

German prosecutors are probing whether HP executives bribed Russian law enforcement officials with eight million euros ($10.9 million) to win a 35-million-euro contract, signed in 2000. The contract was to supply the office of Russia's prosecutor-general with new computer equipment, including both hardware and software, through a German subsidiary.

Authorities in Dresden arrested three suspects in December in connection with the allegations, one current and two former Hewlett-Packard employees. The three were charged with breach of trust, though all three have since been released on bail. Hewlett-Packard spokeswoman Anette Nachbar declined to comment on whether the remaining employee under investigation is still on the company's payroll.

In response to the accusations, Hewlett-Packard released a simple statement: "This is an investigation of alleged conduct that occurred almost seven years ago, largely by employees no longer with HP. We are cooperating fully with the German and Russian authorities and will continue to conduct our own internal investigation."

But Nachbar declined to comment on the discrepancy between the date of the suspicious contract (2000) and the date of the "alleged conduct" in the HP statement.

Network of shell companies

Prosecutors believe that the three HP workers, one of whom is German, acted without the knowledge of top management, and Hewlett-Packard is apparently being treated as a victim in the case. "We are not investigating Hewlett-Packard directly," confirmed Wolfgang Klein, spokesman for Dresden state prosecutors, "At the moment we are only concentrating on the suspects we have."

There are six other suspects in the case, three of whom are German, who were also arrested and questioned in December, but they are thought to have been middlemen in the alleged crime, and have been released without charge pending further investigation. "They were not connected with Hewlett-Packard, but with the network of companies involved in passing on the money," Klein told Deutsche Welle. The nationalities of the other suspects have not been disclosed.

A network of around 10 other companies, some of which were German, is thought to have been used as a funnel for the kickbacks. The Russian prosecutor-general's office declined to give more detailed information on its part in the investigation, but confirmed that its investigators had searched the main Hewlett-Packard office in Moscow on Wednesday at the request of the Dresden authorities.

The Russian authorities are in effect investigating their own part in the affair, since the prosecutor-general's office is also responsible for corruption, but Klein is confident that the department's integrity is intact. "We are not concerned that any of the investigating officers had any part in the alleged crime," he said.

If found guilty of breach of trust, Klein said the suspects could face prison sentences of five to 10 years.

Author: Ben Knight
Editor: Chuck Penfold