IBM To Pay $10 Million To Settle Bribery Charges

Company employees allegedly sent cash and gifts to government officials in China and South Korea.

Paul McDougall, Editor At Large, InformationWeek

March 18, 2011

2 Min Read

IBM has agreed to pay $10 million to settle charges brought by the Securities and Exchange Commission alleging company workers bribed officials in China and South Korea to win lucrative government contracts.

In its complaint, filed Friday in U.S. District Court in DC, the SEC claimed employees of IBM Korea and an IBM joint venture company made improper payments of $207,000 in cash and gifts to South Korean government officials from 1998 to 2003.

The SEC also claimed employees of IBM China Investment Co. and IBM Global Services China "engaged in a widespread practice of providing overseas trips, entertainment, and improper gifts to Chinese government officials." The SEC did not specify the amount of the alleged bribes in China.

According to the SEC's complaint, "The misconduct in China involved several key IBM China employees and more than 100 IBM China employees overall." The Commission slammed Big Blue for allegedly failing to police its own workers, and said the company did not have procedures in place that would detect improper activities by employees.

"Despite its extensive international operations, IBM lacked sufficient internal controls designed to prevent or detect these violations of the FCPA (Foreign Corrupt Practices Act)," the SEC said.

"During the period 1998 to 2009, IBM had corporate policies prohibiting bribery and procedures relating to compliance with the FPCA; however, deficient internal controls allowed employees of IBM's subsidiaries and joint venture to use local business partners and travel agencies as conduits for bribes or other improper payments to South Korean and Chinese government officials over long periods of time," the SEC alleged.

The Wall Street Journal reported Friday that IBM has agreed to pay $10 million to settle the charges, without admitting guilt.

In a statement, IBM officials said the matter has been resolved.

"IBM has agreed to settle an enforcement action with the US Securities and Exchange Commission relating to activities by employees of IBM Korea and IBM China during the period from 1998 through 2009. IBM insists on the highest ethical standards in the conduct of its business and requires all employees to follow its policies and procedures for conducting business," IBM said.

Investors shrugged off the news, as IBM shares were up .79%, to $155.40, in afternoon trading Friday.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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