IBM Under Temporary Ban from New Federal Contracts

Well, I certainly was surprised by this: prosecutors are examining the relationships between IBM employees and the Environmental Protection Agency. When there is a suspected procurement problem, all federal agencies tend to follow the lead of the one involved in an action. That could quickly become serious for Big Blue:

Armonk, N.Y.-based IBM does business with all corners of the government, though the Defense and Homeland Security departments are much bigger customers than the EPA, according to federal spending databases. Last year IBM's contracts amounted to at least $1.3 billion, roughly 1 percent of its 2007 revenue.

That's not a huge amount, but I wonder if it could scare other business off. No publicly-held corporation will be interested in appearing to be involved in questionable business, even if by proxy. Here's a copy of the emailed statement from the EPA.

The Next Corporate Scandal

When writing a recent article on how regulators and prosecutors were going after people farther down the authority line in corporations, a corporate lawyer and former federal prosecutor said that he expected the subprime mess to eventually turn into investigations, at least. Already there is confirmation that it has. According to an organization called the Asymmetric Threats Contingency Alliance (ATCA) - a group of government officials, business people, academics, "original thinkers," and some 250 members of major media - the FBI "has opened criminal investigations into 14 companies relating to improper subprime mortgage loans," while the SEC has started some three dozen civil investigatons.

If you think that the write-downs were bad enough, just wait, as there will be plenty of lost value when companies spend the time, money, and attention to deal with these investigations. And given that we're talking about the subprime debacle, these won't be small companies. I think we can expect them to be among the largest global financial companies. Bear Stearns, Goldman Sachs and Morgan Stanley have all said that government entities are asking about their subprime activities. Reported SEC targets include Swiss bank UBS AG; US investment banks Morgan Stanley, Merrill Lynch, Bear Stearns; and bond insurer MBIA.