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IBM settles SEC lawsuit alleging bribery in China, South Korea

March 18, 2011 |  4:32 pm

Getprev IBM Corp. has agreed to pay $10 million to settle a civil suit brought by the Securities and Exchange Commission accusing its employees of showering cash, gifts and trips on Chinese and South Korean government officials to procure government contracts.

From 1998 to 2003, employees at a Korean subsidiary of IBM and a joint venture for selling personal computers paid about $207,000 in cash to South Korean officials, along with "improper gifts and payments of travel and entertainment expenses," according to a complaint filed by the SEC.

And from at least 2004 to early 2009, more than 100 employees at two wholly-owned IBM subsidiaries in China participated in a "widespread practice" of plying officials with gifts, trips and other treats and goodies, the complaint alleged.

In one instance described in the court documents, a manager at IBM-Korea would meet in a parking lot near a government official's apartment to hand over cash stuffed in envelopes; over the course of two years, $21,000 was slipped under the table in that arrangement alone in exchange for government contracts to supply mainframe computers and storage equipment.

The SEC alleged that IBM failed to implement proper monitoring systems to ensure complaince with the Foreign Corrupt Practices Act, which prohibits American companies from bribing foreign officials.

Despite IBM corporate policies forbidding bribes, the complaint said, "deficient internal controls allowed employees of IBM's subsidiaries and joint ventures to use local business partners and travel agents as conduits for bribes or other improper payments...over long periods of time."

IBM did not admit to or deny the charges, according to the court documents.

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-- Shan Li

Photo: Visitors crowd the IBM stand at the CeBIT IT fair on March 2, 2011, in Hanover, in central Germany. Credit: Johannes Eisele/AFP/Getty Images.

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