Corruption has become a free for all...$98 million in over payments to kickbacks

Former Commonwealth Bank IT exec changes plea in bribe case

Keith Hunter pleads guilty; will be sentenced in December

17 June 2016

http://www.computerworld.com.au/article/601949/former-cba-it-exec-changes-plea-servicemesh-case/

Keith Hunter, a former IT executive at the Commonwealth Bank, has pleaded guilty in a case linked to allegations of accepting kickbacks in return for software contracts.

Hunter and his co-accused, fellow former CBA IT exec Jon Waldron, were charged with accepting kickbacks in exchange for awarding contracts to US company ServiceMesh (now owned by CSC).

NSW Police laid charges against the pair in early 2015.  The duo originally pleaded not guilty. However, Hunter has since changed his plea to guilty and he appeared in court this morning before Judge L Flannery for a sentencing date to be set.

Hunter will appear again in Sydney District Court on 5 December for sentencing.  In addition to the criminal charges, there are a number of civil cases linked to the matter.

The Ace Foundation – a non-profit that is alleged to have been used to channel funds to Hunter and Waldron – last year sued CBA in a US court. That case, which has since been settled, was over the US$2.5 million at the centre of the kickback allegations.

The funds were frozen as part of a NSW Crime Commission civil case launched in the NSW Supreme Court in mid-2015.  In addition, in the US in May last year CSC sued the founder of ServiceMesh, Eric Pulier, in relation to the affair.  The company filed the suit in Delaware’s Court of Chancery.

CSC acquired ServiceMesh in 2013 for over US$260 million, including $93 million in cash and an earnout payment of $98 million. Pulier received $9 million of an initial cash payment by CSC, as well as $25 million of the earnout payment. In addition he recieved a transaction bonus of over $13 million, and CSC shares worth around $26 million, according to a CSC court filing.

CSC says the earnout payment was based on ServiceMesh revenue generated between 1 January 2013 and 31 January 2014.  “A significant amount of that revenue came from contracts between ServiceMesh and Commonwealth Bank of Australia Ltd,” states CSC’s initial court filing.  “In fact, but for that revenue, ServiceMesh equity holders—including Pulier—would have received no earnout payment at all.”

The filing adds:

In 2014—after receiving his $9 million initial cash payment, $13 million employee bonus, $25 million earnout payment, and $26 million worth of restricted stock units, and while employed by CSC—Pulier transferred more than $2 million to the personal bank accounts of two senior information technology executives at CBA, both of whom have since been arrested in Australia on charges of commercial bribery. Pulier made the transfers principally through an intermediary company he had recently formed called Ace, Inc. (“Ace”). These large payments breached the Equity Purchase Agreement and violated numerous CSC rules and policies that Pulier agreed to when he signed a Retention Agreement with CSC. Pulier did not advise or seek approval from CSC before the payments, and CSC did not learn about the payments until long after Pulier made them.

CSC says in its filing that Pulier caused it to pay over $98 million more than it would have otherwise when acquiring ServishMesh and “resulted in a significant criminal law enforcement investigation in Australia that has caused CSC to incur significant legal and investigative costs.”