The highlights of the article are:
Recently, HPQ announced a settlement of $108 million for charges brought by the SEC on bribery of foreign governments to obtain contracts for their computer products.
The company’s general counsel assured prosecutors that the wrongdoing was performed by a small group of people, who are no longer with the company.
Investors should monitor HPQ more carefully following this corruption; however, given HPQ’s strong fundamentals, should wait to take profits unless further misdeeds are revealed.
Here is the rest of the article:
Recently, HPQ announced a settlement of $108 million for charges brought by the SEC on bribery of foreign governments to obtain contracts for their computer products.
The company’s general counsel assured prosecutors that the wrongdoing was performed by a small group of people, who are no longer with the company.
Investors should monitor HPQ more carefully following this corruption; however, given HPQ’s strong fundamentals, should wait to take profits unless further misdeeds are revealed.
Here is the rest of the article:
HP Settles Problem
Hewlett Packard (HPQ) has been one of the top names in computer technology for
decades. The company's ability to supply quality products at popular prices has
made it a favorite in the United States and around the world.
Recently, the
company announced the settlement of $108 million for charges brought by the
U.S. Department and Securities and Exchange Commission on bribery of foreign
governments to obtain contracts for their computer products.
Department of
Justice/SEC Claims
Unfortunately, it
was not just one claim of bribing a foreign government for business contracts
that got HP into difficulty. It appears to have been a systemic strategy of
doing business in a number of countries around the world.
In Russia, HP was
found to have paid over $2 million to a governmental official to allow them to
continue their multi-million dollar contract with a federal prosecutor's
office. Much the same thing was done in Poland, where HP handed out $600,000 in
a combination of money and gifts to help them win a contract with their
national security office.
The Settlement
Deal
The company fully
cooperated with the DOJ and SEC during the investigation. In return for the
$108 million, the Department of Justice agreed to put off prosecution of the
company's Polish unit on the charges. They also signed a non-prosecution
agreement against the company's Mexico division.
However, it
became clear during the investigation that HP had put aside a slush fund for
bribe money, as well as shell companies to lauder funds. Anonymous e-mail
accounts and prepaid phones were used to make contact with officials to arrange
the deals.
HP Attempts To
Move Forward
Clearly, HP did
not come out of the process smelling like a rose. Whatever poor decisions had
been made in their eagerness to secure these contracts, the company is taking
specific steps to resolve the matter and put it behind them.
The company's
general counsel John Schultz assured prosecutors that the wrongdoing was
performed by a small group of people, who are no longer with the company.
Despite these assurances, investors are wondering what other information may
crop up to shear off profits and undermine the company's reputation.
Should Investors
Move On As Well?
HPQ stock has
been strong thus far in Q1 2014 (see chart below), receiving two significant
rating upgrades from Deutsche Bank and Barclays in the past two months.
(Yahoo! Finance)
While this recent
news is certainly troubling, investors should hope Mr. Schultz's statement concerning
a localized, now removed, group of wrongdoers is true, and that corrupt
practices have not spread throughout the company.
While
shareholders should thus be more critical of HPQ, we recommend waiting to take
profits unless further misdeeds are revealed.
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