IBM to Limit Contracts on Latin Projects

Stung by scandals in Argentina and Mexico over alleged fraud and illegal-bidding practices on multimillion-dollar government contracts, IBM said Friday that the only public business it wants in Latin America from now on is what it can get from public tenders.

In Argentina, IBM will pull out of public-sector business altogether, the company told Reuters on Friday. The company has been under investigation since a 1996 indictment alleged fraud in connection with a $250-million contract it won in 1994 to computerize record keeping at Banco de La Nacion.

Then last month, the Mexico City attorney general’s office conducted a highly public raid of IBM’s offices here and issued arrest warrants for three IBM employees.

The raid and warrants were in connection with a $24-million contract IBM won in 1996 to supply the city with a criminal database system to facilitate crime reports at 70 police stations. The city said it suspects IBM won the contract in an illegal bid and furthermore claims the system doesn’t work.

IBM has denied all criminal allegations. The IBM spokesman did not explain the policy change. An executive at IBM’s office in Mexico City said he could neither comment on nor confirm the Reuters report until talking with IBM executives in New York after the holiday weekend.

“That’s IBM’s decision, but their problems have more to do with themselves than whatever places they are [doing business] in,” said Victor Carranca Bourget of the Mexico City attorney general’s office.

Two former IBM executives are among those indicted in Argentina, and four others in New York have been asked to submit to questioning. A New York judge said recently he may resort to issuing international arrest warrants for the four IBM executives because they have not responded to questioning.

The three IBM executives in Mexico City remain free on bail, although Carranca now says they are subject to arrest because they have failed to appear before a magistrate as required. The three are all Mexican citizens.

At a June 26 news conference, the city’s attorney general, Samuel Del Villar, said IBM had won without submitting to an open bidding process as required by federal law. He also alleged that the city was stuck with an “unusable” system that it unplugged in May in frustration.

IBM maintains that it won the contract fairly after competition with two other competitors, which it would not identify. IBM also said that the operational problems the attorney general’s office complained about were normal for a network its size.

IBM was in the process of fixing them when the city attorney general’s office unplugged the system, a spokesman said last month.

An IBM spokesman in Mexico City would not comment on the prosecutor’s assertion that the three employees are all subject to arrest.

The contract for the IBM system was awarded during the previous Mexico City mayoral administration and the case has strong political overtones. Criminologists in Mexico City said that the attorney general office’s handling of the case has been needlessly heavy-handed.

IBM has denied any wrongdoing in the Argentina case, while admitting that company policies were not followed.