Hewlett-Packard Canada on Friday announced it has reached a settlement with the Government of Canada concerning a dispute over contracts between the two parties. HP will award the government $146 million, “an amount determined by both parties to be appropriate upon investigation,” according to a statement issued by the company.

In March 2004, the Department of National Defence (DND) alleged that it had been scammed out of millions in a contract scheme, specifically with contracts originally held by Compaq Canada. These agreements were taken over by HP when it purchased Compaq in 2001.

The DND had originally noticed there was a problem during an audit which occurred at the expiration of a contract in September 2003. According to the DND, the audit highlighted some irregularities of the contracting process, which prompted further investigation and audits.

As a result of that audit, the DND fired an employee with contract oversight responsibilities.

In a statement released in March, HP said it was engaged in subcontracting activities with a variety of supplier companies at the request of the DND.

HP stated that the DND’s instructions were to process invoices for these suppliers although the nature of the work being performed was, in many instances, never disclosed by the DND. HP said that it repeatedly requested the particulars of the work being provided but was informed by the DND that the work was confidential and that in the interest of national security, HP was not entitled to the information.

Instead of engaging in protracted litigation with the Government of Canada, HP said it made the decision to reimburse the sum of $146 million while trying to recover the money from “individuals and companies who were involved in a scheme to misappropriate funds from the Government of Canada and HP Canada.”

The Canadian government has agreed to co-operate with HP in this effort.

– With files from Cindy Watson, IT World Canada