• Css Template Preview
  • Css Template Preview
  • Css Template Preview
  • Css Template Preview


IBM's reputation has taken a hit



In spite settlements with the SEC amounting to several billions of usd large multinationals, insists on the highest ethical standards in the conduct of its business and requires all employees to follow its policies, internal controls and procedures for conducting business. Like most other settlements the company settles with the SEC without admitting or denying the allegations.

The Securities and Exchange Commission (SEC) announced Friday 19th march 2011 that it has reached a $10 million settlement with the company, over allegations IBM violated accounting and internal control provisions relating to the alleged bribery of Chinese and South Korean government officials to secure business. Regulators alleged that employees of IBM's subsidiaries in China and South Korea, as well as a South Korean joint venture;
  • Paid government officials cash bribes,
  • Provided free computers and covered their entertainment costs as a means to secure sales.
  • IBM failed to accurately reflect its transactions and disposition of its assets in its books, records and accounts.
  • IBM failed to develop an adequate internal accounting control system to ensure its policies were being followed.

A Large Envelope of Cash
During the period 1998 to 2009, IBM failed to make and keep books and records that accurately reflected the improper payments made in South Korea and China. Instead, these payments were recorded as legitimate business expenses.
  • In South Korea, employees of IBM's Korean subsidiary & JV LG IBM PC paid out around $207,000 in cash bribes.
  • An IBM Korea territory manager met with a South Korean electronic operations division chief on a regular basis over a three-year period -- giving that individual an IBM Korea shopping bag containing a large envelope with cash.
  • IBM Korea paid out $76,372 in bribes to the operations chief, in exchange for receiving a preferred mainframe computer supplier status and receiving payments from the government at higher prices than warranted.
  • Over a two-year period, this IBM Korea manager allegedly paid $21,000 to a government official responsible for mainframe computer purchases. In exchange for the payments, the government official allegedly continued to maintain IBM Korea as the mainframe supplier, and also aided one of the company's business partners in winning a $21 million government bid to supply mainframe computers and storage equipment.

Internal Monitoring Questioned During the course of five years, IBM's internal controls failed to discover at least 114 cases in which IBM China employees and the local travel agencies allegedly created fake invoices to match off-site customer training sessions. As part of its contract with customers in China, IBM would provide training to customers' employees. Under its internal policies, however, Big Blue refused to pay for any side-trips and stopovers not related to its training.

IBM, according the lawsuit, had anti-bribery policies in place but didn't adequately monitor them for compliance:
  • Despite its extensive international operations, IBM lacked sufficient internal controls designed to prevent or detect these violations of the FCPA.
  • During the period 1998 to 2009, IBM had corporate policies prohibiting bribery and procedures relating to compliance with the FCPA [Foreign Corrupt Practices Act of 1977]
  • Deficient internal controls allowed employees of IBM's subsidiaries and joint venture to use local business partners and travel agencies as conduits for bribes or other improper payments to South Korean and Chinese government officials over long periods of time.