HP to pay $55m to settle kickbacks case

Hewlett-Packard has agreed to pay $55m (£35m) to settle kickback allegations related to federal government contracts.

The leading personal computer maker, which is in a bidding war with Dell for the data storage company 3Par, has previously said it would settle the case and that the agreement would reduce earnings for its fiscal third quarter by 2 cents a share.

HP was accused of paying kickbacks to other companies that recommended federal agencies buy its products.

The allegations were brought to light by whistleblowers in 2004.

"Contractors must deal fairly with the government when doing business with federal agencies," said Tony West, an assistant attorney general at the Justice Department.

The settlement also resolves another case involving pricing problems with an HP contract with the General Services Administration, which handles much of the federal government's procurement. HP had discovered in 2007 that it may have failed to provide complete pricing information during contract negotiations.