HP to Pay $55 Million to Settle Federal Kickback Allegations

Hewlett-Packard will pay a $55 million fine to settle a federal investigation into allegations that the vendor and other companies paid kickbacks for government contracts.

Officials with HP, the world’s top PC vendor, announced Aug. 2 that an agreement in principle had been reached with the Department of Justice, and estimated that the settlement would be around $50 million. The DOJ confirmed this week that HP’s fine will be $55 million.

The allegations were levied under the federal False Claims Act. Investigators said that between 2001 and 2006, HP paid as much as $3 million to system integrators in hopes of gaining favorable treatment in government contracts.

The allegations first surfaced when officials with system integrators Accenture and PricewaterhouseCoopers filed whistleblowers’ lawsuits in 2004 against Accenture, HP and Sun Microsystems, all for allegedly soliciting payments or making those payments—or “influencer fees”—for government technology contracts.

The DOJ joined the lawsuit against all three companies in 2007.

In a statement, Assistant Attorney General Tony West said the lawsuit was a warning to other companies doing business with the federal government.

"As this case demonstrates, we will take action against those who seek to taint the government procurement process with illegal kickbacks," West said. "Contractors must deal fairly with the government when doing business with federal agencies."

At the time that they announced a settlement had been reached, HP officials said that the agreement did not amount to an admittance of guilt.

"HP denies engaging in any illegal conduct in connection with these matters," the company’s statement read. "HP has agreed to a settlement with the Department of Justice, without any admission of wrongdoing, in order to resolve the allegations in full."

The settlement also brings to a close another complaint against HP filed in 2002 that claimed the vendor, in a contract with the GSA (General Services Administration), had misled the agency regarding the pricing of hardware systems and software by providing incomplete information during negotiations.

The cases against Accenture and Sun—now part of Oracle—reportedly are ongoing.