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IBM Corporation

South Korea and China Bribery

Date: 03/18/2011 (Date of Settlement Announcement)

Misconduct Type: Ethics

Enforcement Agency: SEC

Contracting Party: None

Court Type: Civil

Amount: $10,000,000

Disposition: Settlement

Synopsis: The U.S. Securities and Exchange Commission (SEC) charged IBM with violating the books and records and internal control provisions of the Foreign Corrupt Practices Act (FCPA) as a result of the provision of improper cash payments, gifts, and travel and entertainment to government officials in South Korea and China. SEC alleged that from 1998 to 2003, employees of IBM Korea, Inc., an IBM subsidiary, and LG IBM PC Co., Ltd., a joint venture in which IBM held a majority interest, paid cash bribes and provided improper gifts and payments of travel and entertainment expenses to these officials in order to secure the sale of IBM products. SEC also alleged that from at least 2004 to early 2009, employees of IBM (China) Investment Company Limited and IBM Global Services (China) Co., Ltd., both wholly-owned IBM subsidiaries, engaged in a widespread practice of providing overseas trips, entertainment, and improper gifts to Chinese government officials. Without admitting or denying SEC’s allegations, IBM consented to the entry of a final judgment in which it agreed to pay $5,300,000 in disgorgement, $2,700,000 in prejudgment interest, and a $2,000,000 civil penalty.