HP to pay 55 million dollars in kickbacks case
WASHINGTON — Hewlett-Packard has agreed to pay 55 million dollars to settle claims the US computer giant defrauded the US government, the Justice Department announced Monday. — The settlement resolves allegations that HP paid kickbacks …
Context & Ripple Effects
This settlement lands at the end of a bruising month for Hewlett-Packard: CEO Mark Hurd resigned on August 7 over a harassment claim, leaving the succession question open, and HP is locked in a confirmed bidding war with Dell that has pushed its offer for storage maker 3PAR to roughly $1.6 billion after Dell matched. The company also absorbed the $1.2 billion Palm acquisition in April and is preparing a webOS tablet for early 2011.
The $55 million payout to the Justice Department over alleged government-contracting kickbacks is not HP's first trip through this channel — it settled a related suit for $14.5 million back in December 2006 — which makes the repeat pattern, not just the dollar figure, the analytically interesting part.
First-order effects
- HP writes a $55 million check and resolves Justice Department claims it defrauded the federal government via kickbacks, closing the case without an admission fought through litigation — but with the payout landing while the company operates without a permanent CEO.
Second-order effects
- With the board simultaneously running a CEO search and defending its escalated 3PAR bid against Dell, any fresh compliance stain gives rivals and shareholders added leverage to question HP's governance during deal negotiations.
Third-order effects
- A second government-settlement payout within four years points toward large federal contractors treating seven-figure fraud settlements as a recurring cost of doing business — and toward the Justice Department continuing to use negotiated payouts rather than trials as its enforcement instrument against major IT suppliers.
The trend: Major US government IT vendors are normalizing negotiated fraud settlements as a routine compliance cost, with HP's repeated payouts marking the pattern.