​Former CBA and ServiceMesh executives charged with fraud in the US

The former head of ServiceMesh has been charged with bribing executives at the Commonwealth Bank of Australia in order to win a $98 million incentive bonus.

A federal grand jury in Los Angeles indicted former head of Southern California software company ServiceMesh Eric Pulier on Wednesday, along with a former IT manager for the Commonwealth Bank of Australia (CBA).

The charges include securities fraud and conspiracy, with Pulier alleged to have bribed CBA executives in order to win a $98 million incentive bonus. Authorities also say Pulier paid about $2.5 million in bribes to the IT manager Joe Waldron and another bank executive Keith Hunter to obtain bank contracts for his company.

Computer Sciences Corporation (CSC) entered into an arrangement with ServiceMesh back in 2013, which saw the Pulier-led firm purchased on the basis of its profits.

The deals between Waldron and Hunter at the bank pushed up company revenues and triggered the $98 million incentive payout. The total sale price of ServiceMesh to CSC was $260 million, which comprised $93 million in cash and an earnout payment of $98 million, given to ServiceMesh owners. Authorities say Pulier's cut was about $30 million.

Arrest warrants were issued for Waldron and Pulier, after Hunter agreed to settle charges in September 2016.

A spokesperson for Pulier told ZDNet the evidence will prove he is being wrongly accused.

"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," the spokesperson said.

"To the contrary, the contracts ServiceMesh signed with the Commonwealth Bank of Australia in 2013 and 2014 were legitimate."

The spokesperson said CSC touted ServiceMesh's work for CBA as a "success story", even after 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," the spokesperson added. "We are confident that Mr. Pulier will be vindicated."

Hunter is currently serving a three-and-a-half-year gaol sentence handed down to him in December from a district court in Sydney.

The former executive general manager of Infrastructure and Operations was sentenced after pleading guilty to two counts of bribery for a parallel case in early 2016.

The first offence related to causing a financial disadvantage to his employer by deception, which saw CBA spending AU$6.65 million on software and other IT-related services -- later found by Ernst & Young that the bank did not actually need.

With a maximum delegation of AU$1 million, Hunter split the AU$6.65 million purchase up into seven separate transactions and did not undertake any proper procurement procedures before transacting with ServiceMesh.

The second offence related to Hunter, on an annual salary at CBA in excess of AU$1 million, agreeing to receive financial remuneration of $300,000 by showing favour to ServiceMesh.

CBA, by way of Hunter, purchased McAfee security products from ServiceMesh despite using Hewlett-Packard for its McAfee applications in the past.

On the first count, Hunter received a non-parole sentence of one year, nine months, with an additional one year and three months. On the second count, Hunter received a fixed term of 12 months.

This totals three years, six months, with an overall non parole period of two years, three months.

With AAP

Updated 1.00 pm AEST 30 September 2017: Added comments from Eric Pulier's spokesperson.

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