SEC Division of Corporation Finance no-action letter: International Business Machines Corporation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

DIVISION OF
CORPORATION FINANCE June 26, 2007
Ms. Elizabeth L. Grayer
Cravath, Swaine & Moore, LLP
825 Eighth Avenue
New York, NY 10019-7475
Re: In the Matter of International Business Machines Corporation - Waiver Request of Ineligible Issuer Status under Rule 405 of the Securities Act Dear Ms. Grayer:
This is in response to your letter dated June 21,2007, written on behalfofIntemational Business Machines Corporation (Company), and constituting an application for relief from the Company being considered an "ineligible issuer" under Rule 405(l)(vi) ofthe Securities Act of 1933 (Securities Act). The Company requests relief from being considered an "ineligible Issuer" under Rule 405(l)(vi), due to the entry on June 25, 2007, of a Commission order (Order) pursuant to Section 21C ofthe Securities Exchange Act of 1934 (Exchange Act), naming the Company as a respondent. The Order finds, among other things, that the Company caused Dollar General Corporation to violate Section lO(b) ofthe Exchange Act and Rule 10b-5 thereunder. Based on the facts and representations in your letter, and assuming the Company will comply with the Order, the Commission, put-suant to delegated authority has determined that the Company has made a showing ofgood cause under Rule 405(2) and that the Company will not be considered an ineligible issuer by reason ofthe entry ofthe Order. Accordingly, the relief described above from the Company being an ineligible issuer under Rule 405 ofthe Securities Act is hereby granted. Any different facts from those represented or non-compliance with the Order might require us to reach a different conclusion. Sincerely, 7l7~~f'!r -Marh<.osterlitz, Chief Office ofEnforcement Liaison Division ofCorporation Finance

THOMAS R. BROME
~08ERT O. JOrFE
ALLEN F'INKELSON
RONALD.S. ROLF'E
PAUL C. SAUNDERS
DOUGLAS D. BROADWATER
ALAN C. ST£PHENSON
MAX R. SHULMAN
STUART W. GOLD
JOHN E. BEERBOWER
EVAN R. CHESLER
PATRICIA GEQGHEGAN
MICHAEL L. SCHL!:R
KFIIS F. HEINZELMAN a. ROBBINS KIESSLING
~OGER D. TURNER
PHILIP A. GELSTON f'fORY O. MILLSON
F"'RANCIS P. 8ARRON
RICHARD W. CLARY
WIL..IAM P. ROGERS. JR.
,JAMES D. COOPER
STEPHEN L. GORDON
DANIEL L. MOSL.EY
GREGORY M. SHAW
CRAVATH, SWAINE &. MOORE LLP

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GEORGE: E. '%Q8ITZ
GEORGE: A. STE'PHANAt(IS
THOMAS D. BARR
OF" COUNSEL
KATHERINE B. FORRI!:.ST DARIN P. McATEE ROS~RT ROSENMAN KEITH R. HUMMEL GARY A. 8¢RNST'EIN CHRISTINE 8E:SHAR· June 21, 2007 In the Matter ofDollar General Corporation SEC File No. HO-9238 Dear Ms. Kosterlitz:
We submit this letter on behalfofInternational Business Machines Corporation ("IBM") in connection with a proposed settlement arising out ofthe above￾entitled investigation by the Securities and Exchange Commission (the "Commission"). The proposed settlement would result in the issuance of an order that is described below (the "Proposed Order"). IBM hereby requests, pursuant to Rule 405 under the Securities Act of 1933 (the "Securities Act"), 17 C.F.R. § 230.405, that the Commission determine that, for good cause shown, it is not necessary under the circumstances that IBM be considered an "ineligible issuer" under Rule 405. IBM requests that this detennination be effective upon the entry ofthe Proposed Order. It is our Wlderstanding that the Division of Enforcement do~ no.t ObJect to the Division ofCorporation Finance providing the requested determ1natiOn. , BACKGROUND The Commission and IBM have reached agreement on the terms ofthe Proposed Order. IBM is submitting an offer ofsettlement in which it neither admits nor denies the findings ofthe Proposed Order but consents to its entry in agreed fonn. The Proposed Order will find that IBM caused Dollar General Corporation's ("Dollar General's") violation ofSections lO(b), 13(a) and 13(b)(2)(A) ofthe Securities and. Exchange Act of 1934 (the "Exchange Act") and Rilles 10b-5, 12b-20 and 13a-11 1 The authority to grant or deny a waiver ofineligibility has been delegated by the Commission to the Division ofCorporation Finance. See 17 CFR 200.30-1.

2 thereunder, will find that IBM violated Section 13(b)(2)(A) ofthe Exchange Act and will direct that IBM cease and desistfrom committing or causing any violations and any future violations ofthese securities laws and regulations. In addition, IBM will undertake to pay $7,000,000 to the Clerk ofthe United States District Court for the Middle District ofTennessee to be deposited and joined to the funds currently held in SEC v. Dollar General Corporation, et al., C.A. No. 3:05-0283. DISCUSSION Rule 405 under the Securities Act, effective December 1, 2005, makes available to certain issuers, referred to as "well-known seasoned issuers," the benefits of certain securities offering reforms reflected in the Commission's recently-adopted rules modifying the registration, communications and offering processes under the Act. See Release No. 33.;8591 (July 19,2005). IBM currently qualifies asa well.;known seasoned issuer under Rule 405. IBM understands that entry ofthe Proposed Order could operate to make IBM an "ineligible issuer" under Rule 405 and therefore no longer able to qualify as a well-known seasoned issuer. In relevant part, Rule 405 defines "ineligible issuer," as "an issuer with respect to which any ofthe following is true as ofthe relevant dates of determination:
(1) (vi) Within the past three years (but in the case ofa decree or order agreed to in a settlement, not before December I, 2005), the issuer or any entity that at the time was a subsidiary ofthe issuer was made the subject of any judicial or administrative decree or order arising out of a governmental action that:
(A) Prohibits certain conduct or activities regarding, including future violations of, the anti-fraud provisions ofthe federal securities laws; (B) Requires that the person cease and desist from violating the anti-fraud provisions ofthe federal securities laws; or (C) Determines that the person violated the anti-fraud provisions ofthe federal securities laws." Pursuant to section (2) ofthe definition, however, the Commission may determine ''upon a showing ofgood cause, that it is not necessary under the circumstances that the issuer be considered an ineligible issuer."

3
IBM requests that the Commission make this determination on the following grounds:

1. Rule 405 was adopted as part ofrefonns intended to improve the delivery
   oftimely, high-quality infonnation to the securities markets by issuers. See Release No. 33-8591 at 21. As part ofthis effort, Rule 405 created a new category ofissuer - a "well￾known seasoned issuer" - that is eligible to benefit from certain streamlined communications rules and registration processes for registered transactions under the Securities Act.
2. Rule 405 also created a category ofissuer - an "ineligible issuer" - that,
   because of, among other things, its alleged failure to provide accurate infonnation about itself and its securities to the securities markets, should be deemed ineligible to benefit from theserefonns.
3. IBM is alleged to have participated in a certain business transaction with
   Dollar General which Dollar General allegedly misreported in its financial statements in violation ofSection 10(b) ofthe Exchange Act and Rule 10b-5 thereunder.
4. There are no allegations that any disclosures made by or about IBM
   violate the anti-fraud provisions ofthe federal securities laws.
5. Although the entry ofthe Proposed Order could operate to make IBM an
   "ineligible issuer" under Rule 405, because the alleged fraud does not involve IBM's own disclosures, such a categorization is incOnsistent with the purposes ofRule 405. In light ofthese considerations, there is good cause to determine that ffiM should not be considered an "ineligible issuer" under Rule 405. We respectfully request that the Commission make that determination. Please contact me with any questions about this request. Mary J. Kosterlitz, Esq. Division ofCorporation Finance U.S. Securities and Exchange Commission 100 F Street, NE Mail Stop 3628 Washington,D.C:20549 VIA EMAIL AND FEDERAL EXPRESS