HP Settles Kickback Case for $55 Million

Uncle Sam doesn't like it when you try to pull one over on him, and that's something Hewlett Packard had to go and find out the hard way. After standing accused of offering kickbacks to systems integrator companies in exchange for recommending HP products to U.S. agencies, the OEM has agreed to fork over $55 million to put the whole incident in their rear view mirror, the Justice Department announced this week.

"Contractors must deal fairly with the government when doing business with federal agencies," said U.S. assistant attorney general Tony West. "As this case demonstrates, we will take action against those who seek to taint the government procurement process with illegal kickbacks."

The settlement also puts to rest claims that HP inflated prices as part of a 2002 contract between the OEM and the General Services Administration, which HP was allegedly able to do by withholding information from the GSA. That 8-year-old contract dealt with the sale of computer equipment and software to federal agencies.

Despite the $55 million settlement, HP is being anything but stingy with its money. The OEM is currently involved in a bidding war with Dell for data storage provider 3Par, which started out at $1.13 billion and has quickly escalated to $2 billion. The general consensus is that HP will eventually win out and acquire 3Par, but for how much still remains to be seen.