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SEC and DoJ charge ServiceMesh founder with $98m fraud

Eric Pulier denies bribing execs at Australia's Commonwealth Bank to inflate earn-out payments

UPDATE The United States Securities and Exchange Commission (SEC) and Department of Justice (DoJ) have charged ServiceMesh founder Eric Pulier with attempting to defraud technology services giant of US$98 million.

The scheme played out in Australia, where the SEC alleges Pulier paid “kickbacks” to execs at the Commonwealth Bank (CBA) “through a purported nonprofit organization” in order to have them acquire ServiceMesh products. The DoJ says payments of “approximately $2.5m” saw two CBA execs sign up for $10.4m of ServiceMesh software.

Those contracts “triggered an 'Earnout' payment as part of a sale agreement with CSC that caused CSC to pay an additional $98 million to ServiceMesh shareholders, about $30 million of which went directly to Pulier,” the DoJ's statement says.

One of the Commonwealth Bank executives involved, Keith Hunter, has already pled guilty to taking payments from the ACE Foundation, the “purported nonprofit” entity controlled by Pulier. Hunter, admitted those payments were an inducement to purchase ServiceMesh products.

A second CBA executive, John Waldron, awaits his day in court in Australia. The DoJ has issued an arrest warrant for Waldron and for Pulier. The latter is “is expected to surrender to authorities in the coming days.”

The DoJ's charge sheet is long: both Pulier and Waldron will be asked to face counts of securities fraud and wire fraud. Pulier will also have to defend “six counts of interstate travel and use of interstate facility in aid of commercial bribery, obstruction of justice, and two counts of filing a false tax return.”

The DoJ says the obstruction of justice charge “relates to Pulier’s alleged effort to influence a former ServiceMesh executive to provide false information to the FBI and Grand Jury about payments made by Pulier through TechAdvisors. The tax fraud charges relate to charitable deductions taken by Pulier for payments by Ace made to Waldron, Hunter, and others. “

As news of the scandal broke, CSC suspended Pulier, who later resigned from the services company. CSC later announced it would sue Pulier.

The SEC's complaint is here [PDF]. ®

UPDATE, 0910 AEST Friday September 29th.

A spokesperson for Eric Pulier has been in touch with the following statement.

“Eric Pulier has been wrongly accused of crimes he did not commit."

"The evidence will show that Mr. Pulier did not bribe anyone for contracts to increase the earn-out payment to ServiceMesh shareholders. To the contrary, the contracts ServiceMesh signed with the Commonwealth Bank of Australia in 2013 and 2014 were legitimate."

"CSC touted ServiceMesh’s work for CBA as a 'success story' even long after false allegations were made about bribery. Indeed, far from being defrauded in its acquisition of ServiceMesh, CSC’s CEO publicly acknowledged that the ServiceMesh acquisition 'really paid off' for CSC. We are confident that Mr. Pulier will be vindicated.”

+Comment Them's fighting words, but also words at odds with Keith Hunter's guilty plea.

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