Former CBA IT exec sentenced to 3.5 years behind bars

After pleading guilty to two counts of bribery earlier this year, Keith Hunter will spend a total of three and a half years in gaol.

Former Commonwealth Bank of Australia (CBA) executive general manager of Infrastructure and Operations Keith Hunter has been sentenced to three and a half years behind bars, after pleading guilty to two counts of bribery earlier this year.

"There is no doubt his primary motivation was greed," Judge D. Arnott said in handing down his judgement.

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 to the tune of $300,000 by showing favour to ServiceMesh.

Pennsylvanian-born Hunter used his position to sign contracts with Californian IT services provider ServiceMesh, which was about to be acquired by Computer Sciences Corporation (CSC). The terms of the sale were determined based on the revenue stream of ServiceMesh and as a result, it was found ServiceMesh reached out to Hunter to sell him products for CBA.

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.

CBA, by way of Hunter, purchased McAfee security products from ServiceMesh despite using Hewlett-Packed 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.

"Commonwealth Bank referred matters to the NSW Police in early 2015 involving the conduct of two former employees, because we took the view then, as we do now, that it was the right thing to do. We have consistently said that part of being ethical and having strong values is that we must act," a spokesperson for CBA said.

"We considered that the suspicious activity of these individuals was serious which is why we took the step of reporting their activity to the NSW Police. The police acted by laying charges against two former employees. One has now been sentenced.

"We have cooperated with the police throughout their investigation and the proceedings and will continue to do so as the judicial process continues for the other individual."

Hunter was arrested and charged with two counts of bribery in March last year as part of an ongoing joint investigation between the New South Wales Police's fraud and cybercrime squad and the United States Federal Bureau of Investigation (FBI). Police alleged at the time that he and another former CBA employee Jon Waldron were involved in accepting more than $1.5 million in suspected corrupt payments from ServiceMesh.

At the time, Hunter pleaded not guilty to two counts of bribery and was granted bail on the condition that he surrender his passport, report to police daily, and is not to enter an airport. Hunter has since been unable to work or leave the country as the passport is US-issued.

Defence had previously requested leniency from Judge Arnott after it was heard Hunter was suffering from clinically diagnosed depression. It was also requested by the defence that consideration be taken regarding "special circumstances", which included that it was Hunter's first time in custody, his age, and his isolation from family and friends, in addition to his current mental state.

Although Judge Arnott took this and Hunter's thought process while accepting the bribes into consideration, he said those involved in white collar crime must expect to be held accountable as it is the expectation of the public that this be upheld.

Hunter received a 50 percent discount on his sentencing, which comprised 25 percent reduction for pleading guilty, 15 percent reduction due to the unlikelihood he would offend again, and 10 percent thanks to his prior good behaviour.

62-year-old Hunter begins his sentence from yesterday.

In a parallel case, Hunter agreed to settle charges in the United States in September that he participated in the scheme to defraud CSC of approximately $98 million. The US Securities and Exchange Commission noted that CSC's former executive vice president of cloud computing bribed Hunter to have CBA enter into contracts in 2013 and 2014, which resulted in the CSC executive receiving an earn-out payment.

The SEC's complaint further alleged that the CSC executive, a majority shareholder of ServiceMesh, received over $30 million of the additional $98 million earn-out payment, and funnelled at least $630,000 to Hunter for his role in the fraudulent scheme.

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