March 18, 2011 10:22 pm

IBM to pay $10m in SEC bribery case

IBM agreed to pay $10m to settle charges by the US Securities and Exchange Commission that it bribed South Korean and Chinese officials to win government contracts.

The SEC accused IBM of multiple violations of the Foreign Corrupt Practices Act in Korea and China in a civil complaint made public on Friday.

The regulator said that senior IBM officials in South Korea repeatedly plied government officials with shopping bags full of cash to win multimillion-dollar contracts to supply computers.

According to the SEC court filing, IBM officials in Korea between 1998 and 2003 paid bribes totalling $207,000 to a series of procurement bureaucrats.

Executives delivered the local currency equivalents of as much as $21,000 in cash at a time, using envelopes or shopping bags.

The contracts at issue were worth as much as $21m for mainframes and other computers.

In China, several key employees and more than 100 staffers overall “engaged in a widespread practice” of providing overseas trips and other gifts to government workers between 2004 and early 2009.

IBM itself lacked internal controls to prevent such conduct, putting it in violation of the anti-bribery stature, the SEC said. IBM didn’t admit or deny the claims in court.

“IBM took the appropriate measures to address the issues after it became aware but we are not going to go into detail,” company spokesman Douglas Shelton told the Financial Times.

More than four years ago, allegations of IBM bribes surfaced during a corruption case in China. It was unclear if that case prompted the SEC to open the China probe. Also uncertain was whether the US inquiry is proceeding.

Mr Shelton said that the SEC has been looking into the Korean half of the matter since 2004.

The court files do not name the IBM subsidiaries and its executives, who included IBM-Korea’s territory manager for the public sector. An SEC attorney who filed the complaint in Washington federal court said that he wasn’t authorised to comment.

The SEC has made enforcement of the law in question a major priority in the past few years.

Alcatel-Lucent in December agreed to pay $137m over claims that it bribed officials to get telecoms deals in Latin America and Asia. That scheme was said to include $14m distributed in bogus consulting deals.

The previous month, Royal Dutch Shell and five other companies in the oil and freight industries agreed to pay almost $237m to end inquiries by the SEC and the US Department of Justice.

The probe covered allegations of bribery in more than 10 countries from 2001 to 2007.

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