SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16839 / December 21, 2000
SEC v. INTERNATIONAL BUSINESS MACHINES CORPORATION, U.S.D.C. for the District of Columbia, 1:00CV03040 (JR)
SEC SETTLES FOREIGN CORRUPT PRACTICES ACT CASE AGAINST IBM
The Commission today announced the filing of a settled cease-and-desist proceeding against International Business Machines Corporation ("IBM"). The case involves violations of the books and records provisions of the Securities Exchange Act of 1934, resulting from presumed illicit payments to foreign officials by one of IBM's wholly-owned subsidiaries during 1994. Without admitting or denying the Commission's findings, IBM consented to the entry of an Order that requires IBM to cease and desist from committing or causing any future violation of Section 13(b)(2)(A) of the Exchange Act. In addition, the Commission announced the filing of a complaint in the United States District Court for the District of Columbia against IBM seeking a civil money penalty. Without admitting or denying the allegations in the complaint, IBM consented to the entry of a judgment ordering IBM to pay a $300,000 penalty.
The Order finds that IBM violated Section 13(b)(2)(A) of the Exchange Act in connection with a $250 million contract to integrate and modernize the computer system of a commercial bank owned by the Argentine government. According to the Order, certain former senior management of IBM-Argentina, S.A. ("IBM-Argentina"), a wholly-owned subsidiary of IBM, caused IBM-Argentina to enter into a subcontract with Capacitacion Y Computacion Rural, S.A. ("CCR"), and money paid to CCR by IBM-Argentina in connection with the subcontract was apparently subsequently paid by CCR to certain bank officials. Specifically, the Order finds that, during 1994 and 1995, IBM-Argentina paid CCR approximately $22 million under the subcontract, of which at least $4.5 million was transferred to several bank directors by CCR.
The Order further finds that, in connection with the subcontract, IBM-Argentina's former senior management overrode IBM procurement and contracting procedures, and hid the details of the subcontract from the technical and financial review personnel assigned to the contract. In the Order, the Commission finds that IBM-Argentina's former senior management provided IBM-Argentina's procurement department with fabricated documentation, including a backdated authorization letter and a document that stated incomplete and inaccurate reasons for hiring CCR. According to the Order, IBM-Argentina recorded the payments to CCR in its books and records as third-party subcontractor expenses. This information was incorporated into IBM's 1994 Form 10-K, which was filed with the Commission on March 23, 1995.