Hewlett-Packard's Moscow offices were raided by Russian authorities Wednesday as part of a joint Russian and German bribery investigation.
According to The Wall Street Journal, which first reported the story, German and Russian authorities are investigating whether HP paid nearly $11 million in alleged bribes to win a lucrative government contract in Russia worth 35 million Euro, or approximately $47 million. Ironically, the contract, which HP won in 2003, was to supply computer equipment and software to Russia's criminal prosecutor department in Moscow.
The report states that authorities suspect HP of allegedly using a German subsidiary to win the Russian government contract and then using an assortment of shell companies throughout the globe to funnel the bribe payments to the intended parties in the Russian government.
An HP spokesperson told The Wall Street Journal that the alleged criminal activity took place nearly seven years ago, and that the majority of the employees implicated in the probe are no longer with the company. The suspects in the bribery probe have not been identified. HP also said it is cooperating fully with the investigation.
According to a Reuters report, German officials are looking at HP's practices further back than 2003 and authorities believe the Russian contract was actually secured in 2000. The Wall Street Journal's report states HP learned of the bribery probe in December when authorities informed the company of warrants against 10 suspects in the investigation.
While HP did not disclose the investigation in its most recent quarterly report dated March 11, the company did hint at potential trouble with foreign authorities.
"In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act," the report reads. "Although we implement policies and procedures designed to facilitate compliance with these laws, our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, may take actions in violation of our policies. Any such violation, even if prohibited by our policies, could have a material adverse effect on our business and reputation."