SACRAMENTO — Over the past dozen years, Hewlett-Packard has sold hundreds of millions of dollars worth of printers and other products to Iran through a Middle East distributor, sidestepping a U.S. ban on trade with the country.
Now the person who headed HP for much of that time, Carly Fiorina, is ramping up to run for U.S. Senate. And questions are emerging about what Fiorina knew about HP's growing presence in Iran during her six-year tenure at the Silicon Valley firm from 1999 to 2005.
With Iran drawing condemnation abroad for its suspected pursuit of nuclear weapons and crackdown on government dissidents, Fiorina could find herself on the defensive. Did the former CEO know that her company was selling its wares to Iran through a European subsidiary and then a Middle Eastern distributor while she was at the helm? If an HP executive had such direct knowledge, that would violate the trade embargo.
Fiorina, a Republican who is gearing up to challenge three-term Democratic incumbent Sen. Barbara Boxer in 2010, declined an interview request. But she issued a statement through her campaign spokeswoman saying that she was unaware of any sales to Iran during her time at the company.
"It is illegal for American companies to do business in Iran," the spokeswoman, Beth Miller, wrote. "To her knowledge, during her tenure, HP never did business in Iran and fully complied with all U.S. sanctions and laws."
Early this year, the U.S. Securities and Exchange Commission issued a letter to HP seeking information about the company's dealings in Iran, Syria and Sudan. HP responded that in fiscal 2008 about $120 million worth of products were sold to Iran by a Dutch subsidiary through a Middle Eastern distributor. But even as the company claimed that those sales were legal because its subsidiary was acting on its own, HP in January announced it was severing ties with Dubai-based Redington Gulf. The distributor had sold HP products to Iran since 1997, two years after the United States imposed a complete ban on exports to Iran.
The announcement came days after The Boston Globe reported from Iran that HP printers had become nearly ubiquitous there despite the embargo.
One former federal trade enforcement official said HP's dealings with the country are ripe for further investigation. If Fiorina or other HP employees based in the United States were aware that HP products were being resold to Iran, they could face fines or even prosecution for violating the trade embargo, said Mike Turner, former director of the Office of Trade Enforcement at the U.S. Department of Commerce.
"If I was still sitting in my chair today," said Turner, who retired as head of the enforcement agency two years ago, "I'd be looking at who at HP had knowledge of this and when did they develop that knowledge."
But one expert who represents firms seeking to comply with trade laws said he would be surprised if a company as large and sophisticated as HP did not take pains to insulate its U.S. operations from any sales to Iran.
"It had to be heavily vetted," said Douglas Jacobson, an attorney with the Washington, D.C., law firm Sandler, Travis & Rosenberg. As long as the sales were conducted by an entity outside the country and without knowledge or help from a U.S. employee, he said, the transactions pass legal muster.
Even if HP is able to satisfy legal questions, that doesn't mean Fiorina is in the clear politically. HP's relationship with its Middle East distributor, Redington Gulf, flourished on her watch.
In 1999, after she took over at HP, the company's Middle East general manager was quoted in a United Arab Emirates English-language newspaper calling Iran "a big market for Hewlett-Packard printers" and noting sales growth in the country was 50 percent. Fiorina herself in 2003 cited the Middle East as a growth region amid flagging sales elsewhere (she did not mention Iran specifically). And the same year, Redington Gulf trumpeted in a press release that sales of HP products had topped $100 million.
"The seeds of the Redington-Hewlett-Packard relationship were sowed six years ago for one market — Iran," the release said.
Fiorina's likely primary opponent, Assemblyman Chuck DeVore, R-Irvine, who happened to work on trade enforcement matters for the U.S. Defense Department in the 1980s, is already raising the issue in campaign missives.
"There is a record of the firm using "... gymnastics to circumvent U.S. export controls against the Islamic Republic of Iran," DeVore said in an interview. "I find that troubling and a point of weakness" for Fiorina.
Boxer's campaign declined to comment. But state Democratic Party chairman John Burton predicted voters won't buy Fiorina's explanation.
"She's running a company and doesn't know what's happening there?" Burton said. "It's always somebody else's fault."
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