On May 28, 2021, the Securities and Exchange Commission announced a final judgment by consent entered against Eric Pulier, a former IT executive at Computer Sciences Corporation (CSC) and co-founder of Servicemesh, Inc. (SMI), a cloud-computing company, to resolve allegations that Pulier participated in a commercial bribery scheme related to the acquisition of SMI by CSC in 2013.
According to the complaint filed in 2017 in the US District Court for the Central District of California, in 2013, CSC agreed to purchase all of SMI’s shares. The transaction was structured such that there was an initial cash payment for the shares plus a possible additional payment if SMI met certain revenue targets for the period January 1, 2013 through January 31, 2014. Pulier, as a major shareholder in SMI, stood to earn millions of dollars if SMI hit its revenue targets. According to the complaint, Pulier paid about $2.5 million in bribes to executives of the Commonwealth Bank of Australia (CBA), a publicly-traded bank, to induce CBA to enter into certain contracts with CSC. By doing so, Pulier increased SMI’s/CSC’s revenue by more than $10 million. The increased revenues triggered a $98 million earn-out payment, causing Pulier, as a major SMI shareholder, to personally receive a benefit of $30 million. According to the complaint, Pulier, after entering into this commercial bribery scheme, signed a representation letter in which he falsely stated that there were no “side letters or agreements (written or oral)” with respect to these and other CSC contracts. Pulier also signed a sub-certification that stated there were no side agreements and there had been no fraud in connection with the revenue earned. The complaint stated that CSC’s CFO and auditors relied upon these statements in preparing CSC’s Form 10-K.
The SEC alleged that through this conduct, Pulier violated antifraud provisions of US securities laws, specifically Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Rule 13b2-2, which penalizes lying to external auditors. The SEC also charged Pulier with violating the FCPA’s books and records and internal controls provisions, specifically, Section 13(b)(5) of the Securities Exchange Act and Rule 13b2-1 thereunder. Pulier consented to the final judgment without admitting or denying the allegations, and was ordered to disgorge $3.9 million, pay prejudgment interest of nearly $650,000 and a civil penalty of $260,000.