The US Securities and Exchange Commission and Department of Justice have joined forces to compel the Californian software firm of Hewlett Packard to pay $108 million in fines and other penalties for bribing public officials in Mexico, Poland and Russia.

The US Securities and Exchange Commission and Department of Justice have joined forces to compel the Californian software firm of Hewlett Packard to pay $108 million in fines and other penalties for bribing public officials in Mexico, Poland and Russia. Regulators in Germany were also involved.

Compliance practices or 'programmes', as the Americans call them, were lacking in the associate-vetting area in some cases; this is the area that most experts think of as the most conducive to corruption.

The US authorities allege (but offer no proof) that the corruption in question helped to secure $40 millions' worth of contracts to install hardware at the national police headquarters in Poland and €35 millions paid by government prosecutors in Russia for 'purported' services rendered. Officials at Pemex, Mexico's nationalised petrol company, are also said to have taken bribes.

Hewlett Packard Russia has been charged under the US Foreign Corrupt Practices Act. Pursuant to a deferred prosecution agreement, the department filed a criminal information charging Hewlett-Packard Poland with breaking the accounting provisions of the FCPA. Hewlett-Packard Mexico has already signed a non-prosecution agreement with the US Government pursuant to which it will forfeit proceeds and admit everything. In total, the three HP entities will pay $76,760,224 in criminal penalties and forfeiture. Meanwhile, the US Securities and Exchange Commission has charged Hewlett Packard $31,472,250 in 'disgorgement,' prejudgment interest and civil penalties.

The Guardian reports that a Pole called Thomasz Z, who used to work for Hewlett Packard as an executive, has been charged with giving $600,000-worth of cash and IT equipment to the head of police IT. The Polish corruption saga is dated between 2006 and 2010. Hewlett Packard Poland, needless to say, subverted its own financial crime controls.

Bribery often takes a less direct route, however. In Mexico, the firm paid more than $1 million in inflated commissions to a consultant, who then pocketed some of the cash and paid the rest to a Pemex functionary to seal the relevant deal. 'Consultant abuse' is a perennial bugbear of the Organisation for Economic Co-operation and Development, whose job it is to influence world anti-bribery policy.

The Russian corruption, however, is the most exciting and elaborate. In 1999, the Russian government announced a major IT overhaul at the prosecutor-general's office. That project itself was worth more than $100 million but HP Russia also viewed it as the 'golden key' to another $100 to $150 million from various government agencies. To secure this, HP Russia created a secret slush fund, in part to pay bribes to Russian government officials.

As admitted, Hewlett Packard Russia created excess profit margins for the slush fund through an elaborate buy-back deal structure, whereby it (a) sold hardware and other products called for in the contract to a Russian "channel partner," (b) bought those same products back from an intermediary company at a €8 million mark-up and paid the intermediary an additional €4.2 million for purported services, and (c) sold the same products to the prosecutors at the inflated price.

The payments to the intermediary were then largely transferred through a cascading series of shell companies—some of which were directly associated with government officials—registered in the US, the UK, the British Virgin Islands and Belize. Much of the money that the intermediary paid was laundered through off-shore bank accounts in Switzerland, Lithuania, Latvia, and Austria. Portions of the funds were spent on travel, cars and other luxury goods.

To keep track of these corrupt payments, the conspirators inside Hewlett Packard Russia kept two sets of books: secret spreadsheets that detailed the categories of recipients of the corrupt funds and sanitized versions that hid the corrupt payments from others outside HP Russia. They also made off-the-books side-deals. For example, a Hewlett Packard executive executed a letter agreement to pay €2.8 million in purported 'commission' fees to a UK-registered shell company that was linked to a director of the Russian government agency responsible for managing the prosecutors' office project. Hewlett Packard Russia never told any internal or external auditors (or managers outside Russia) about the agreement and conducted no 'due diligence' of the shell company.