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IBM discloses broad new DOJ investigation

IBM said in an SEC filing this week that the DOJ has opened an FCPA investigation into transactions in Poland, Argentina, Bangladesh, and Ukraine. ‘The DOJ is also seeking information regarding the company’s global FCPA compliance program and its public sector business,’ IBM said.

The disclosure came in IBM’s quarterly SEC filing on April 30.

Two years ago, IBM reached a settlement with the SEC of FCPA accounting offenses stemming from improper cash payments to officials in China and Korea. IBM agreed to pay the SEC $10 million in penalties.

But last year, a federal judge whose final approval is needed, rejected the settlement. He hasn’t reset a hearing date to consider the terms agreed between IBM and the SEC.

Reports said Judge Richard Leon cited IBM’s history of books and records violations, and asked for ‘annual reports regarding the company’s FCPA compliance, specifically telling him about all possible accounting violations.’

IBM and the SEC wanted only actual bribe allegations to be reported, the stories said.

In its new disclosure this week, IBM said it is cooperating with the DOJ.

The company didn’t say if the new DOJ investigation is related to Judge Leon’s rejection of the earlier SEC settlement.


Here’s the full FCPA disclosure from the Form 10-Q filed with the SEC by International Business Machines Corporation on April 30:

In March 2011, the company announced that it had agreed to settle a civil enforcement action with the Securities and Exchange Commission (SEC) relating to activities by employees of IBM Korea, LG IBM, IBM (China) Investment Company Limited and IBM Global Services (China) Co., Ltd., during the period from 1998 through 2009, allegedly in violation of the Foreign Corrupt Practices Act of 1977 (FCPA). As part of the settlement, IBM consented to the entry of a judgment relating to the books and records and internal control provisions of the securities laws. IBM also agreed to pay a total of $10 million, categorized by the SEC as follows: (i) $5.3 million, representing profits gained as a result of the conduct alleged in the SEC’s complaint, (ii) prejudgment interest on that amount of $2.7 million, and (iii) a civil penalty of $2 million. The settlement is subject to court approval. In early 2012, IBM notified the SEC of an investigation by the Polish Central Anti-Corruption Bureau involving allegations of illegal activity by a former IBM Poland employee in connection with sales to the Polish government. IBM is cooperating with the SEC and Polish authorities in this matter. In April 2013, IBM learned that the U.S. Department of Justice (DOJ) is also investigating allegations related to the Poland matter, as well as allegations relating to transactions in Argentina, Bangladesh and Ukraine. The DOJ is also seeking information regarding the company’s global FCPA compliance program and its public sector business. The company is cooperating with the DOJ in this matter.



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