By KEVIN FREKING

Source:

September 8, 2010

WASHINGTON—Democratic Sen. Barbara Boxer has been omitting essential details as she criticizes her GOP opponent, Carly Fiorina, over past sales of Hewlett-Packard Co. equipment to Iran—criticism that has emerged as a central campaign strategy for the incumbent.

Boxer issued the latest attack on Fiorina during a campaign event this week in South San Francisco. The three-term senator said HP was “skirting American law at the time” and that the products could have ended up in the hands of the Iranian military.

“Just to sum it up, Iran presents a real danger to Israel, to America and to the world, and when Fiorina was the CEO at HP she skirted the law, she sold printers to Iran, which HP now says could well have gone to the Iranian military,” Boxer said at the Tuesday campaign stop.

But the three-term incumbent is not telling the complete story. No federal agency has sanctioned HP for the sales of printers and printer supplies, and Fiorina herself has never been implicated as having any knowledge of them.

Fiorina has said she was unaware of the sales, which were made through a Middle East distributor and started before she became CEO in 1999. They continued for four years after she was let go by HP in 2005.

Fiorina campaign officials emphasized that the allegations are being made by political opponents and not by government agencies, which have known about the sales since at least late 2008.

“The point is nothing ever happened

because they didn’t do anything wrong,” said Fiorina’s campaign spokeswoman, Andrea Saul.

The U.S. Treasury Department is charged with administering the embargo and has not assessed any penalties against Hewlett-Packard or the third-party distributor, Dubai-based Redington Gulf, for violations of trade sanctions. The agency will not comment on whether any sanctions could be forthcoming or whether it continues to investigate the matter.

The Securities and Exchange Commission also corresponded extensively with HP over the printer sales and closed the matter without taking enforcement actions.

HP announced a halt to the sales in January 2009, shortly after a Boston Globe story noted that HP printers and printer supplies had become a top seller in Iran despite the U.S. embargo.

Boxer’s allegations are not new. Republican candidate Chuck DeVore and Tom Campbell raised the issue during the GOP primary contest this spring.

The allegations could hurt Fiorina with Jews and Evangelical Christians—two groups the first-time candidate has worked hard to court during the course of the campaign. Both groups are staunch supporters of Israel, which lobbied for the trade sanctions. Fiorina traveled to Israel during the past week to demonstrate her support for the country.

Boxer’s description of HP “skirting” the law is exactly the term Campbell used during the primary. The issue also came up during a primary debate as Chuck DeVore said it was hypocritical for Fiorina to call for tougher sanctions against Iran when she helped undermine them as a CEO at Hewlett-Packard.

“The truth is—and he knows this to be true—HP has been in compliance with all U.S. law,” Fiorina said during the debate. “These accusations that we, that HP, did something unlawful are false, and they are also sadly taking a page from the Democratic playbook during the 2008 presidential convention.”

But Boxer’s campaign also questions how Fiorina could have been unaware of Redington’s sales to customers in Iran given that Hewlett-Packard named the company its wholesaler of the year in 2003.

“Fiorina is running on her record as CEO of HP. If she didn’t know about the biggest wholesaler for the company that year, was she really in charge?” said Boxer campaign spokeswoman Rose Kapolczynski. “And if she did know, she must have known they were skirting the law.”

Shortly after the Globe story appeared, Hewlett-Packard acknowledged that it knew the sales were going on but said they was legal. The company said it would halt the practice “to go beyond the letter of the law.”

The SEC followed up with a letter in February 2009 asking for more details. The agency is charged with ensuring that companies fully disclose of relevant business activities to their investors. Under the 1995 embargo, goods or services cannot be exported from the United States or “by a U.S. person, wherever located.”

HP officials responded that all known sales of HP’s products into Iran involved sales by a Dutch subsidiary. The subsidiary sold printers and related parts to distributors in the Middle East, including Redington Gulf. Since the subsidiary was not a “United States person,” the restrictions did not apply.

HP also argued that the products sold were limited to “printers and printer supplies that were authorized for redistribution into Iran.”

The last correspondence on the issue between the SEC and Hewlett-Packard appears to take place on July 1, 2009, when officials told HP the agency had completed its review of the company’s annual 10-K report and had no further comments on the specific issues raised.

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Associated Press Writer Jason Dearen in San Francisco contributed to this report.