International Business Machines Corp. (IBM) is being probed by the U.S. Justice Department over corruption allegations in Poland, Argentina, Bangladesh and Ukraine, adding to bribery charges from the Securities and Exchange Commission.
The Justice Department is investigating whether IBM violated the Foreign Corrupt Practices Act, the company said in an April 30 filing. In Poland, the department is focusing on a transaction that the Polish Central Anti-Corruption Bureau already was studying, the company said. It involves allegations of a former IBM employee selling to the Polish government.
The Justice Department probe adds scrutiny in new territory as IBM tries to settle with the SEC over activity in China and South Korea. The global reach of the investigation indicates that this isn’t an isolated matter, said Charles Elson, corporate-governance professor at the University of Delaware.
“If it happens in one country, you can say it’s an individual,” Elson said. “If it happens in multiple, you have to ask, is it systemic? And how well was the compliance program put in place to prevent it?”
It’s not uncommon for global companies to face FCPA reviews -- Anheuser-Busch InBev NV (ABI) said in March that its India joint venture was being investigated by the SEC for violations of the act. Still, the probes can rankle investors. Shares of Las Vegas Sands Corp. (LVS)’s Macau unit dropped in March after the parent company said it probably violated the FCPA.
IBM is cooperating with the investigations, the Armonk, New York-based company said in the filing. Peter Carr, a Justice Department spokesman, declined to comment on the disclosure of the investigation.
In March 2011, the company said it had agreed to pay $10 million to settle with the SEC over allegations that it bribed officials to win at least $54 million in government contracts. U.S. District Judge Richard Leon, who has had the case under review, said he won’t accept the deal without a requirement that IBM report any future law enforcement or administrative probes to the court.
“This is a company that has a history of violating the books and records provision of the FCPA,” the judge said in February.
The 1977 Foreign Corrupt Practices Act bars companies or individuals regulated or based in the U.S. from paying bribes to foreign officials to win business. Foreign companies and nationals also can be prosecuted if their corrupt acts were committed in the U.S.
While FCPA enforcement actions started by the Justice Department fell to a six-year low of 11 last year, the government has committed to robustly enforcing the law, a February report by Gibson Dunn & Crutcher LLP said.
IBM’s filing doesn’t give further detail on the transactions in Argentina, Bangladesh and Ukraine that the Justice Department is investigating. The Justice Department also is probing IBM’s global FCPA compliance, the company said.
Ed Barbini, an IBM spokesman, said yesterday in an e-mail that the company has a “robust and effective compliance program.”
“While we will not comment on the specifics of this investigation, it is noteworthy that many such investigations result in no findings of wrongdoing,” Barbini said. “However, if it turns out that our Business Conduct Guidelines have been violated then we will address it promptly and effectively.”
Jacek Dobrzynski, a spokesman at Poland’s Central Anti-Corruption Bureau, couldn’t be reached for comment. Calls to Ukraine’s Interior Ministry and the country’s committee for fighting corruption and rights protection weren’t returned. Today is a public holiday in both countries.
The alleged payments at issue in IBM’s SEC case occurred from 1998 through 2009 and were made by employees at three subsidiaries of IBM, as well as LG IBM PC Co., a joint venture with LG Electronics Inc. (066570), according to the SEC’s complaint.
The SEC said cash payments to South Korean officials from 1998 to 2003 totaled $207,000 and were connected to contracts worth almost $54 million. In China, the IBM employees created “slush funds” at local travel agencies that were used to pay for overseas excursions by government officials, the SEC said. IBM employees also gave gifts, such as cameras and laptop computers, to Chinese officials, according to the complaint.
IBM shares rose 1 percent to $204.51 at the close in New York. The stock has climbed 6.8 percent this year.
The FCPA also formed the basis for an investigation of Wal-Mart Stores Inc.’s Mexican unit. Bloomberg News said last year that the Justice Department was probing allegations that employees for the business paid bribes valued at more than $24 million, a story first reported in the New York Times.
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