A New Zealand shell company was used in a bribery scheme to trigger a USD98 Million bonus to a California software company chief.
A US grand jury has returned an indictment for the former head of the company, Santa Monica-based ServiceMesh, for paying bribes to former IT executives at the Commonwealth Bank of Australia, using a New Zealand shelf company.
The US Attorney, in a statement released today, said the bribes were to approve millions of dollars in contracts that inflated ServiceMesh revenues. The US Attorney alleged they fraudulently caused Computer Sciences Corporation (CSC) to pay a nearly $100 million incentive bonus as part of CSC’s purchase of the cloud software company.
The 15-count indictment details a bribery and kickback scheme that developed over several years and involved two shell corporations.
A former IT manager at CBA, Jon Waldron, is charged with participating in the scheme by facilitating the approval of contracts with ServiceMesh in exchange for approximately $1.9 million in bribes, most of which was paid to him through a shell company in New Zealand, the US Attorney said.
“The indictment charges Eric Pulier – the founder, CEO and largest shareholder of ServiceMesh – with orchestrating the international fraud scheme involving his payment of approximately $2.5 million in bribes to two senior technology executives at Commonwealth Bank of Australia (CBA). In exchange for the bribes, the indictment alleges, the IT executives facilitated $10.4 million in contracts for the sale of software from ServiceMesh to CBA in late 2013 and January 2014. The CBA 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.
“Warrants for the arrest of Pulier, 50, of Los Angeles, and Waldron, 47, of Sydney, Australia, have been issued. Pulier is expected to surrender to authorities in the coming days. Waldron remains in Australia facing related charges brought by Australian authorities.
“The 42-page indictment details an elaborate scheme in which Pulier agreed to pay bribes to Waldron and another CBA IT executive, Keith Hunter, in exchange for their assistance in facilitating contracts to help boost ServiceMesh revenue. The contracts were needed to push ServiceMesh revenues over $20 million – the threshold that triggered CSC paying the incentive bonus. As a result, CSC paid ServiceMesh shareholders, of which Pulier was the largest, an Earnout payment of $98 million in March 2014.
“A portion of Pulier’s ServiceMesh shares were held by a company called TechAdvisors. The indictment alleges that after TechAdvisors received its Earnout payment, Pulier caused TechAdvisors to transfer $4.8 million to a purported nonprofit company named Ace, Inc., which was later renamed The Ace Foundation. Ace was headed by a childhood friend of Pulier, who transferred $2.5 million to accounts held by Waldron and Hunter in Australia, New Zealand and the United States.
“The indictment filed today charges Pulier and Waldron with conspiracy to commit securities fraud and wire fraud, one count of securities fraud and four counts of wire fraud.
“Pulier alone is further charged with 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 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.
The statutory maximum penalties for the charges in the indictment are 25 years in federal prison for the conspiracy and securities fraud counts, 20 years for each count of wire fraud, five years for each count of interstate travel in aid of commercial bribery, 10 years for the obstruction of justice count, and three years for each of the filing false tax return charges.
Hunter was previously charged in a two-count information with conspiracy to commit securities fraud and wire fraud.
The United States Securities and Exchange Commission today filed a civil action against Pulier and Waldron that charges them with securities fraud.
The criminal case stemming from the ServiceMesh fraud scheme is being investigated by the Federal Bureau of Investigation and IRS Criminal Investigation.
The United States Attorney’s Office expressed appreciation to the New South Wales Police Force, Fraud and Cybercrime Squad, for their assistance in this investigation.
This case is being prosecuted by Stephen A. Cazares and Scott Paetty of the Major Frauds Section.