The Securities and Exchange Commission (SEC) and US Department of Justice (DOJ) are conducting an investigation into allegations that HP employees engaged in bribery, embezzlement and tax evasion related to a $44.5 million contract with the Office of the Prosecutor General of the Russian Federation.
HP, which disclosed the SEC and DOJ probe in an SEC filing on Thursday, said it is cooperating with both government agencies.
HP said the government agencies have "recently requested information from HP relating to certain governmental and quasi-governmental transactions in Russia and in the Commonwealth of Independent States subregion dating back to 2000."
The HP filing said the SEC and DOJ probes are related to potential violations of the Foreign Corrupt Practices Act (FCPA) which restricts bribery of foreign officials.
HP could face fines and civil penalties of up to $500,000 per violation and criminal penalties of up to $2 million per violation or up to twice the gain from the violation. The U.S. probes come after HP last year demanded that its global network of 154,000 channel partners complete anti-bribery and regulatory compliance training. Some HP partners at the time were put off by the $120 fee for the compliance training.
The HP training included a short compliance training module with a third-party contractor, reviewing and accepting HP's Partner Code of Conduct. HP partners also had to complete a questionnaire to assess compliance risk.
Alan Weinberger, chairman and CEO of The ASCII Group, a community of 1,500 North American solution providers, said he sees the anti-bribery training as a small price to pay to protect HP from liability that could come from a partner engaged in illegal activity.
"It is easy to make a case that if there is illegal activity, the manufacturer could have or should have known about it and can be tied to it and is therefore liable for the acts of their agents," said Weinberger. "The way the VAR-vendor contract works is the vendor has a broad scope of liability if there is illegal activity by a VAR."
Weinberger said the current economic slump has resulted in more questionable and even illegal activity in all sectors of the economy and more lawsuits related to those actions. "There are horror stories all over the place," he said. "If an independent VAR does something bad, lawyers will sue not only the VAR but the vendor agent or solution provider."
Joe Balsarotti, president of HP partner Software To Go, St. Peters, Missouri, said he is surprised other vendors have not instituted the same kind of compliance training. He also sees the training as a small price to pay for being an HP partner. "It's legal and political cover for HP," said Balsarotti.
"HP is my primary brand," he said. "It is not my only brand, but I like the product. I like the company and I get more than $150 in demo MDF (market development funds) credit each quarter. If this was a $1,500 expense I'd have a lot more questions."
One of the positive effects of the compliance training, said Balsarotti, is that it weeded out smaller VARs that were not committed to the HP product line.