IBM has agreed to pay $10 million to settle Securities and Exchange Commission charges that it violated the Foreign Corrupt Practices Act by bribing foreign officials.
The SEC charged IBM on Friday with violating the books and records, and internal control provisions, of the FCPA by providing cash payments, gifts and travel and entertainment to government officials from South Korea and China.
The SEC alleged that, from 1998 to 2003, employees of IBM Korea Inc., an IBM subsidiary, and LG IBM PC Co., Ltd., a joint venture in which IBM held a majority interest, paid cash bribes and provided improper gifts—including free computers—and payments of travel and entertainment expenses to various government officials in South Korea in order to secure the sale of IBM products. In one instance in 2002, an IBM manager gave a South Korean executive a shopping bag containing an envelope filled with the Korean equivalent of about $19,000 in a parking lot.
In addition, from at least 2004 to early 2009, employees of IBM (China) Investment Company Limited and IBM Global Services (China) Co., Ltd., two wholly owned IBM subsidiaries, engaged in a widespread practice of providing overseas trips, entertainment, and improper gifts to Chinese government officials, according to the SEC.
The SEC complaint said that IBM failed to make and keep accurate books and records that reflected the improper payments to South Korea and China during the period of 1998 to 2009. Instead, the payments were recorded as legitimate business expenses.
Without admitting or denying the SEC’s allegations, IBM consented to the entry of a final judgment that permanently enjoins the company from violating the books and records and internal control provisions of the FCPA.
IBM also agreed to pay disgorgement of $5.3 million, $2.7 million in prejudgment interest, and a $2 million civil penalty.
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