Is IBM Finished with Foreign Bribery Cases?


The original complaint the SEC filed against IBM (NYSE:IBM) in 2011 contained numerous allegations, including bribery overseas and the failure to address these issues internally. Two years later, a district judge in Washington, D.C., finally approved the settlement to allow the company off the hook for a moment, according to a report by Reuters. Other concerns linger with regard to IBM’s overseas business.

The SEC complaint covered a period of 11 years of IBM practices in South Korea and China. It cited “cash payments, improper gifts, as well as improper travel and entertainment to government officials,” among other violations by IBM and its affiliates between 1998 and 2009. The complaint also cited IBM’s ability to monitor its own business internally, and accused the company of keeping inaccurate records to cover up the violations.

District Judge Richard Leon, who was assigned the case in 2011, struck a harsh tone when addressing IBM in court. He told company representatives that “it won’t be a happy day” if he sees IBM in court any time soon. Bloomberg reports Leon did acknowledge a level of satisfaction with the settlement, which would involve a payout of $10 million to the SEC.

As multiple sources note, the payout by IBM does not recognize wrongdoing on the company’s part; it simply settles the matter and clears IBM from facing judgments on the same matter in the near future. An IBM statement struck the predicable tone of corporate accountability.

“When we receive an allegation of wrongdoing, we investigate it and take appropriate action,” an IBM rep said in a statement released following the hearing, per Reuters. The company went so far as to call its compliance “robust,” yet allegations of bribery in South America and Europe are still pending.

According to IBM’s April filing with the SEC, issues are still pending in Argentina and Poland, among other countries, for tax issues and other business practices. Judge Leon’s warning in court to IBM would suggest he’d recommend far higher fines should the company turn up again in his courtroom.

According to the Bloomberg report, the settlement includes a provision that requires IBM to report any foreign probes to the SEC when they are next targeted. It’s unlikely the disclosures will be public. IBM did win the right to file sealed documents relating to the probes.

For now, investors will only be able to find out about ongoing disputes whenever they appear in SEC filings, following their resolution, or if the contents are leaked to the press. The amount of money for pending overseas fines has yet to be calculated. Most recently, a judgment surrounding business in Argentina cost IBM $300,000.

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