HP’s Disclosure Mystery

By Thomas Fox

Thanks to the FCPA Blog for its post Avon: A Pound of Cure. As you said, Avon voluntarily disclosed to the DOJ and SEC its discovery of potential FCPA violations and the on-going internal investigations. I looked into the public record and found that Avon first learned of these allegations via an internal company whistleblower in June 2008. I also discovered that the company made such disclosures as early as October 2008 in an SEC filing and also in its 2008 and 2009 Annual Reports.

 

Avon’s approach contrasts with Hewlett-Packard’s, another company recently making FCPA news. HP apparently first learned of a bribery and corruption investigation when it was served with document requests by German authorities in December 2009 — around the same time that three former and current HP employees were arrested by the same German authorities for allegedly paying bribes to make sales in Russia. As reported by the Wall Street Journal, HP did not report this investigation to the DOJ and SEC until April 2010 and still has not made any public record filing on this bribery and corruption investigation.

 

The Box Score on these timings appears to be:

 

Notifications	Avon	HP
Initially Notified	June 2008	December 2009
How Notified	Company Whistleblower	Arrests of current/former employees, subpoena for documents
Self-Reported the DOJ/SEC	June 2008	April 2010
First reported in SEC Filing	October 2008	None found

 

One of the clear rules from the U.S. Federal Sentencing Guidelines is that self reporting may qualify a corporation for amnesty or reduced sanctions. I wondered if these differences in approaches in self reporting (or not as the case may be) could lead to higher penalties, monetary or otherwise to HP?

 

There are two other curious notes regarding HP.

 

In both its 2008 and 2009 Annual Reports, the company made the following statement: “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. 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.” Could this be the SEC-required admission of an on-going FCPA investigation?

 

And in October 2009, HP ordered (via fax transmission) its 155,000 channel operation partners to take an FCPA compliance training course, and pay to do so. Such training was required in a very short time frame or the channel operations partners risked losing their status with HP. Did HP order the training because an unreported and undisclosed FCPA investigation was ongoing?

 

I’d be interested to hear what others think.

 

Thomas Fox is an attorney in Houston, Texas, specializing in FCPA compliance, risk management and international transactions. His blog can be found here and he can be reached at [email protected].