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SEC v. International Business Machines Corporation

 
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International Business Machines Corporation
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SEC Civil
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March 18, 2011
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SEC v. International Business Machines Corporation
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SEC v. International Business Machines Corporation, No. 11-00563 (D.D.C. 2011)
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In 2004, South Korean authorities brought a bribery and bid rigging enforcement actions against IBM's subsidiary and joint venture in South Korea, as well as several employees of Korean government entities. This case prompted investigations by US authorities.
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Computer & Information Technologies-Hardware
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China, South Korea
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1998; 1999; 2000; 2001; 2002; 2003; 2004; 2005; 2006; 2007; 2008; 2009
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Officials of sixteen unspecified South Korean government entities; government employees from unspecified Chinese government entities
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According to SEC's complaint, from 1998 to 2003, employees of IBM Korea, Inc. ("IBM-Korea"), an IBM subsidiary, and LG IBM PC Co., Ltd. ("LG-IBM"), a joint venture in which IBM held a 51% interest, provided cash payments, entertainment, travel, and gifts to officials of six South Korean government entities and computers to officials of ten additional government entities. The alleged cash payments totaled $207,157 and the alleged entertainment, travel, and gifts were of unspecified total value. Some payments were allegedly made directly by IBM-Korea employees who handed envelopes and shopping bags containing cash to government employees in parking lots. Other payments were allegedly made indirectly through LG-IBM business partners. According to the SEC, in exchange for these payments IBM-Korea and LG-IBM acquired confidential information and were awarded mainframe and personal computer sales contracts.

Also according to SEC's complaint, from at least 2004 to 2009, employees of IBM (China) Investment Company Limited and IBM Global Services (China) Co., Ltd. ("IBM-China"), both wholly owned IBM subsidiaries, engaged in a widespread practice of providing overseas trips, entertainment, and improper gifts to Chinese government officials of an unspecified total value.

Two key IBM-China managers allegedly planned customer trips and involved more than 100 IBM-China employees in a scheme with the IBM-China local travel agency to pay for improper travel and entertainment expenses for officials with Chinese government-owned or controlled customers. Allegedly, there were 114 instances of invoices being fabricated, trips improperly documented, unapproved sightseeing activities, trips funded involving little or no business content, and provision of per diem payments and gifts to officials. In addition, IBM-China personnel falsely designated travel agents as training providers and submitted fraudulent purchase requests to funnel payments for unapproved trips for Chinese officials.

According to the SEC, IBM failed to accurately record these payments in its books and records and lacked sufficient internal controls to detect and prevent these alleged violations.

On July 26, 2013, IBM's settlement with the SEC was approved by the Court.
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Books and records (Issuer), Internal controls (Issuer)
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Civil penalty, Civil Settlement, Disgorgement, Injunction/Cease and desist, Prejudgment Interest
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$5,300,000 (disgorgement), $2,700,000 (prejudgment interest), and $2,000,000 (civil penalty).
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10,000,000
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0
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Issuer
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U.S.
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United States
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Contract Procurement/Retention
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38,400,000
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Cash, Entertainment, Gifts, Travel
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Direct, Sales Agent/Consultant
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207,157
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China, South Korea
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No
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No
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South Korea