US judge SLAMS both IBM and the SEC over bribery settlement
A US federal judge has refused to agree to a settlement between the SEC and IBM over charges dating back to 2011 alleging that Big Blue bribed Chinese and South Korean officials unless the company produces a whole new set of extensive compliance reports. Judge Richard Leon, who has been reviewing the settlement case for the past …
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"But that's how business is done in Asia?" Yes, true, so IBM's crime is very much one of being caught. Now, if they'd just used a local reseller and let the reseller run the bribes side, they could throw their hands up in mock horror, shout long and loud about ethics and innocence, etc., and still walk away with the business. So it looks like someone at IBM got greedy. The fun bit is why are the SEC trying so hard to sweep it under the carpet....?
But that's how business is done in Asia?
True. Bribes are rarely offered, but they are aggressively solicited.
SEC
The SEC prefers to fine companies rather than prosecute. Most of their staff dream of a gig in a fortune 100 and the boards of those companies have long memories. Far better to have them owe you ...
Re: SEC
So you pay bribes to win $54M worth of business, and pay a $10M fine? Not bad, especially if you can simply include the cost of the fine in the markup on your kit. (Is there an accounting column for "fines paid for illegal practices" in the "total cost of goods" spreadsheet?)
Sorry, Judge
Our databases are so totally crap that any data we put in will get lost. Very sorry.
Too much trouble?
Oh dear, producing evidence is inconvenient so let them off says the SEC.
Is there a US slush fund?
Re: Too much trouble?
"Is there a US slush fund?"
IT seems that there is, and it's apparently the same one that gets Google out of hot water with the Feds time and time again...
Re: Too much trouble?
The SEC is a part of the U.S. Executive Branch, under control of the President.
Top corporate contributors to Barack Obama's re-election campaign:
#5 - Google: $814,540
#16 - IBM Corp: $532,372
http://www.opensecrets.org/pres08/contrib.php?cid=N00009638
Downvote this if you approve of Obama showing bias towards contributors!
Judge grows balls
About time these cozy little settlements were put under a cold harsh light. This sort of shit will keep happening so long as the accountants can put a cash figure to it if they get caught. How about something intangible like the CEO or division head going to Federal Prison for a holiday proportionate to the infraction. Maybe then they would think several times before offering bungs.
So, it looks like IBM has bribed the SEC to get them to drop the bribery charges against them. Very creative.
bribery? Nooooooo....
this is called "reaching an agreement". For the sake of public good, etc, etc.
btw, is this fine tax-deductible?
Re: bribery? Nooooooo....
It comes either out of the profit or the shareholders money, so, yes, it reduces taxes paid.
Re: bribery? Nooooooo....
Actually most places specifically disallow fines and penalties as being tax deductible expenses. Can't say for certain but I doubt it.
P.S accounting expense does not always equal tax deductible expense in any case. See deferred tax assets / liabilities.
IBM sad.....
IBM's lawyers very happy!!!
Bring on the hourly billing to vet the required data!!
And yes, I'm glad the judge held out for a better settlement, but still, I bet IBM's lawyers are happy about the required additional work....
$10m fine when the bribery resulted in contracts worth $54m, seriously? If they're going to fine them, they need to fine them an amount which doesn't make the crime worth it, say something more than what they got out of it and then some to ensure that the financial consequences of getting caught are greater than the gain from engaging in these practices.
Suspect it's not just Chinese and Korean officials who are receiving bribes...
"$10m fine when the bribery resulted in contracts worth $54m, seriously? "
The total contract was $54m, not their profit. The average ballpark profit from big contracts is about 20% +/-. ironically 20% of $54m is $10.8m. So after the settlement of $10m , that leaves $800k and i'm sure the lawyers will make short work of that. So all said and done, once the dust settles, IBM will have made a whole bunch of nothing on these contracts...
So these settlements aren't as weak handed as they seem. Often times they're designed to chew up any and all profits made from the illicit ventures. Leaving the only profiting entity from these illegal act being the government. Which is why they dont throw these exec's in jail, the government cant afford for them to think twice about slipping a bribe, or anything else for that matter.
No Pain still equals gain on all hidden misdeeds
There is nothing punitive about losing just the profits when you get caught with your hand in the cookie jar. If they lost 5 or 10 times the value of all the contract they might hesitate to do it again. As it is, when the light goes out the cockroaches come back for the crumbs left behind by the sloppy cleanup.
Either make it legal or make it hurt to be illegal. Making it not hurt to be illegal just makes a mockery of the rule in the first place.
PS next time you will get the judge his cut sooner rather than later.
Re: Wallyb132
".... The average ballpark profit from big contracts is about 20% +/-. ironically 20% of $54m is $10.8m. So after the settlement of $10m , that leaves $800k ......" So you're suggesting that IBM still coming out with a profit, having stopped what could have been better offers from competitors, is OK? Surely the idea should be to make such crimes so painful that fair competition is ensured, meaning that not just all the profit needs to be fined but also a chunk of pain added. If you are suggesting 20% profit then the fine needs to be 30% if not 40%. That would make IBM or any other company looking at bribes think twice.
As a non-yank who the f**k is the SEC?
Please post the full name once for any acronyms used, especially for those of us that live outside of the world called USA..
As a non-yank who the fsck is the SEC?
As all the Brits like to tell the Yanks when this kind of a question is posted, "Have you tried googling it?"
Re: As a non-yank who the fsck is the SEC?
I googled SEC and he's a member of the Cult of Skaro. That puts a whole other slant on the story- IBM are being sued by Daleks!
Or it may be the Securities and Exchange Commission.
The Security and Exchange Commission
A web search show this to be the U.S. Security and Exchange Commission.
http://www.sec.gov/
Good question
As a non-yank who the f**k is the SEC?
That's actually a very good question ... I had been assuming that it must be Samsung Electronics Corporation -- especially as Korea is mentioned in the article, and Samsung are currently no strangers to litigation -- but perhaps I am wrong?
Google, on the other hand, suggests that I may not be ...
Paris, because I'm sure she'd be confused, too.
Yay SEC.
1. Big corporation gets caught fiddling.
2. SEC settles out of court for pennies on the dollar.
3. A few years later, the boss of the SEC dept that signed off on the settlement shows up working in a cushy job* for big corporation mentioned in (1.) above.
* usually a director or "consultant".
Both IBM & the SEC want this to disappear....
Lets get real...
IBM has stashed a lot of cash off shore. At the last tax amnesty deal, the brought in over 5 Billion USD.
If the SEC were to dig deeper, IBM would comply and more dirt will come out and the SEC can't turn a blind eye.
I for one applaud the judge's decision.
Big corps need to be held accountable for their actions...
IBM, Intel, Microsoft, Foxconn and...
...every other company that uses unscrupulous and illegal Biz practices in the U.S. or elsewhere should be fined a full year's revenues for the first offense and treble damages for a second offense. Anything less such as a token $1 billion fine is just the cost of doing business for these evil corporations and CEOs. If they weren't making at least $50 Billion from violation of law, they wouldn't bother. The CEOs of these companies should do mandatory 25 year prison sentences for their crimes in addition to the company fines.
About time the SEC got rapped over the knuckles for doing deals with Wall Street
For years the SEC has molly-coddled the Goldman Sachs ilk on Wall Street so it is good to see a judge highlighting the cosy arrangements.
The USA has repeatedly criticised other nations, including Britain, think Saudi Arabian fighters, for back-handing people to get business whilst, naturally, ignoring their own violators.
I must say the bags of cash is a bit on the nose, I have images of a 50's gangster movie running through whats left of my mind now, thanks IBM. It seems that most IBMer's I have had to deal with do dress like they are from a 50's gangster movie
What about the laws in China and South Korea?
How can a US regulator and Judge enforce punishment on an offense that happened in another country?
Wouldn't this be prosecuted over there, unless the meetings took place in the US of A?
I can't see how we can shout 'Go get em!!' and then bitch and moan when the US legal system is applied to ordinary people in other countries.
I'm not defending their actions, just wondering if this needs to be prosecuted in the country that it actually happened in.
Re: What about the laws in China and South Korea?
That is covered early in the article. The Foreign Corrupts Practices Act applies to US companies trading overseas.
The thing I find amusing is that IBM advertises its know how with data management techniques, hardware, and software. But its too difficult to go back a few years within their records to provide the information the judge requires. One of these claims is a lie. I wonder which one.
Re: What about the laws in China and South Korea?
Why not both statements not being true?
BCG violations!
Wow, those would be some serious Business Conduct Guideline violations...I wonder if anyone got RA'd for that ;)
RICO
I bet if someone was creative enough they could find a way to apply the RICO statute to one of these bad actors. I also bet if this was done a couple of times these corporations may just think twice before pulling the crap they now pull.
Re: RICO
Not gonna happen. If any yankee politician had the nerve to call for RICO [anti-corruption] proceedings against any of these corporations people might ask who'se getting pay-offs (sorry, "campaign contributions") from said corporations. What politician would want to get that ball rolling?
How to make finding the data more easy
If IBM fails to produce the data, issue a contempt arrest warrant for IBM Chairman/President/CEO Virginia M. Rometty. This really works.
In the US, child support payments are mostly taken out by wage garnishment. They are due periodically based on the order (usually weekly), except that if the person is paid on a different schedule, a company can wait for that. So if an employee is paid monthly, the company can send the money in monthly, not weekly.
Back before the dissolution of the Bell System, Bell Labs professional staff was paid monthly, while its non-professional staff - such as janitors - were paid bi-weekly. AT&T kept insisting that they could only pay everything monthly and that it would be impossible to obey the law to garnish the non-professional staff bi-weekly... until one collections department (at the time, usually collected by the county where the case was heard) had enough. AT&T was informed that if the money due was not paid immediately, and was not paid on the legal schedule after that, a warrant would issue in three days at 12 noon for the then AT&T president.
3 lawyers showed up at the county collections window at 11 AM with the money and signed assurances that AT&T would obey the law, which they did henceforth.
People like the one at http://www.ibm.com/ibm/ginni/ simply think that orange isn't their color, and will do anything to prevent that...
Perjury
And there was me thinking lying to a judge was a criminal offence.
How naive...
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