Former Head of SoCal Software Firm and IT Executive at Australian Bank Charged- Bribery/$98M Fraud

https://www.justice.gov/usao-cdca/pr/former-head-socal-software-firm-and-it-executive-australian-bank-charged-bribery-scheme

Department of Justice
U.S. Attorney’s Office
Central District of California

FOR IMMEDIATE RELEASE
Wednesday, September 27, 2017

Former Head of SoCal Software Firm and IT Executive at Australian Bank Charged in Bribery Scheme to Inflate Revenues and Trigger $98 Million Bonus Payment Related to Purchase of Software Company

LOS ANGELES – A federal grand jury today returned an indictment that alleges the former head of Santa Monica-based ServiceMesh, Inc. paid bribes to former IT executives at Commonwealth Bank of Australia to approve millions of dollars in contracts that inflated ServiceMesh revenues and 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.

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. The indictment also charges Jon Waldron, a former IT manager at CBA, 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.
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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.
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