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HP Agrees To Settlement In Justice Department Kickbacks Probe

Rob Wright

The settlement will likely end a long-running government probe as well as a False Claims Act lawsuit filed in 2004 against HP by two whistleblowers; the proposed agreement requires the approval of both the Justice Department and a federal judge.

“HP denies engaging in any illegal conduct in connection with these matters,” the company said in a press statement. “HP has agreed to a settlement with the Department of Justice, without any admission of wrongdoing, in order to resolve the allegations in full.”

The case began in 2004 when a False Claims Act lawsuit was filed by two whistleblowers at Accenture and PricewaterhouseCoopers that accused HP, Sun Microsystems and Accenture of making illegal payments to partners in order to secure federal government contracts. The False Claims Act lets private citizens file lawsuits on behalf of the government.

The Justice Department started an investigation into the case and soon filed its own complaint in 2007 and accused the world’s largest computer maker of using a kickback scheme to influence the award of government contracts. HP consistently denied the allegations but ultimately decided it was in the best interest of shareholders to settle the lawsuits.

The company said it expects a negative impact of approximately 2 cents per share on third quarter fiscal year 2010 earnings, which would total roughly $50 million according to estimates. HP did not provide updated guidance for either its third fiscal quarter or the remainder of its 2010 fiscal year except for this one-time charge.

While the Justice Department investigation may be coming to a close, HP is still contending with bribery allegations in Russia. HP offices in Moscow were raided by Russian authorities in April as part of a joint investigation between Russian and German authorities into allegations the company used bribes to win government contracts in Russia.

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