HP 2012 Annual Report Download - page 162

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 18: Litigation and Contingencies (Continued)
Sales Private Ltd (‘‘HPI’’), a subsidiary of HP, seven current HP employees and one former HP
employee alleging that HP underpaid customs duties while importing products and spare parts into
India and seeking to recover an aggregate of approximately $370 million, plus penalties. Prior to the
issuance of the show cause notices, HP deposited approximately $16 million with the DRI and agreed
to post a provisional bond in exchange for the DRI’s agreement to not seize HP products and spare
parts and to not interrupt the transaction of business by HP in India.
On April 11, 2012, the Bangalore Commissioner of Customs issued an order on the products show
cause notice affirming certain duties and penalties against HPI and the named individuals of
approximately $386 million, of which HPI had already deposited $9 million. On December 11, 2012,
HPI voluntarily deposited an additional $10 million in connection with the products show cause notice.
On April 20, 2012, the Commissioner issued an order on the parts show cause notice affirming
certain duties and penalties against HPI and certain of the named individuals of approximately
$17 million, of which HPI had already deposited $7 million. After the order, HPI deposited an
additional $3 million in connection with the parts show cause notice so as to avoid certain penalties.
HPI filed appeals of the Commissioner’s orders before the Customs Tribunal along with
applications for waiver of the pre-deposit of remaining demand amounts as a condition for hearing the
appeals. The customs department has also filed cross-appeals before the Customs Tribunal. A hearing
on the deposit waiver was expected to be held in December 2012 but was postponed at the request of
the Customs Tribunal. A new hearing date is expected to be set for February 2013. After that hearing,
the Customs Tribunal is expected to set the actual amount of the additional deposit that will be
required for HPI to proceed with the appeals. The amount of the additional deposit for the products
appeal is expected to be between zero and $367 million, plus interest, and the amount of the additional
deposit for the spare parts appeal is expected to be between zero and $3 million.
On March 12, 2012 the Chennai Additional Commissioner of Customs issued an order affirming
duties, interest and penalties of approximately $254,000 on one of the two June 17, 2010 software show
cause notices. HPI had deposited $108,000 during the investigation and after the order deposited an
additional $21,500 against this software order to avoid certain penalties. HPI has filed an appeal before
the Commissioner (Appeals) along with application for waiver of pre-deposit of the remaining demand
amount as a condition for hearing the appeal. The amount of the additional deposit for the Chennai
software appeal is expected to be between zero and $80,000.
Russia GPO and Related Investigations. The German Public Prosecutor’s Office (‘‘German PPO’’)
has been conducting an investigation into allegations that current and former employees of HP engaged
in bribery, embezzlement and tax evasion relating to a transaction between Hewlett-Packard
ISE GmbH in Germany, a former subsidiary of HP, and the General Prosecutor’s Office of the Russian
Federation. The approximately A35 million transaction, which was referred to as the Russia GPO deal,
spanned the years 2001 to 2006 and was for the delivery and installation of an IT network. The
German PPO has issued an indictment of four individuals, including one current and two former HP
employees, on charges including bribery, breach of trust and tax evasion. The German PPO has also
asked that HP be made an associated party to the case, and, if the German PPO’s request is granted,
HP’s participation in the court proceedings would be limited to any portion of the proceedings that
could ultimately bear on the question of whether HP should be subject to potential disgorgement of
profits based on the conduct of the indicted current and former employees.
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