May 14, 2004 11:00 AM PDT

HP to pay $105 million to settle Canada dispute

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Canada, HP tussle over defense dealings

March 11, 2004
Hewlett-Packard will reimburse the Canadian government $105 million (146 million Canadian dollars) to resolve a contractual dispute, but plans legal action to recover the money from the parties it says are responsible, the Palo Alto computer and printer maker said Friday.

Separately, Canada said it is satisfied that HP has fulfilled its contract obligations. The government said it will cooperate with HP in the legal action to retrieve the money.

"HP determined that it was important for the company to honor its contractual obligations, rather than engage in protracted litigation with the government of Canada, despite the lack of evidence that HP employees derived any improper benefit from the scheme," HP said in a statement.

The case involved an HP Canada contract to provide information technology products and services to Canada's Department of National Defense (DND), tasks for which HP sometimes enlists subcontractors, spokeswoman Monica Sarkar said. In those situations, HP pays the subcontractor then submits an invoice to the DND.

However, the DND requested that HP submit other invoices for subcontractors not involved in HP's contract, Sarkar said. HP did so, but the DND wouldn't provide specifics about the subcontractors' work, despite HP's repeated requests, citing reasons of national security and confidentiality, she said.

"We believe employees of DND and others unknown to us engaged in potentially fraudulent activity," Sarkar said. "We are now going to join together, the government and HP, to take aggressive legal action against the people that were involved in the scheme."

 

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