HP settles with U.S. DOJ over 2007 fraud suit

Mark Hurd hands over his lunch money

After over 3 years of running around the legal jungle gym, the United Stated Department of Justice has finally caught up with Hewlett-Packard, the world’s current leading provider of technological stuff, and reached a settlement after rubbing HP’s face in the sand a couple of times [ DOJ -1 | HP -0 ].  The settlement lays to rest 2007 allegations of kickbacks and fraud related to government contracts negotiated by technology contractor Accenture over the past decade.

According to the 2007 lawsuit  the government was originally seeking restitution to the tune of triple the amount of its losses, plus additional fines for fraud and deception.  The alleged amount stolen from the government was 26 million, which means that the government was seeking a ‘mere’ $78M + fines from the parties involved for its trouble.  According to HP’s press release  they expect the settlement to have a negative $0.02 per share impact on their earnings.  Perhaps easier to understand:  $0.02 x 2,334,496,000 shares outstanding makes the settlement worth approximately $46.7M when all is said and done.

Another important fact to mention is that as part of the settlement, HP has not plead guilty to any of the charges leveled against it, and “denies engaging in any illegal conduct in connection with these matters.” Say what you will about HP’s corporate ethics, but officially they have done no wrong after their check clears.

So the bottom line here is that HP’s legal goon squad has managed to save the company a cool $30 mil or so at face value (before their modest fees anyway), but while we’ve got a calculator in front of us, here’s a little more numeric goodness for your consideration.  Adjusting for inflation, that original $78 million asking price would become worth about $81.9M in 2010 dollars [ DOJ -1 | HP -1 ].  Based largely on news of the settlement, HPs stock price (HPQ) jumped up $1.52 or 3.3% today, which works out to be a healthy market capitalization increase of $3.5 BILLION [ DOJ -1 | HP -over9000? ].

At the end of the day some will say that everybody got what they wanted, the government recouped their alleged $26M in losses plus a little extra, HP got off the hook by paying only about 60% of the original sum, and investors followed suit making it Christmas in August for HP.  Then again, the government is funded by the people, so by defrauding the government, HP & company are in fact cheating each and every American citizen.  Just some food for thought. S|A

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