7 Tech Industry Scandals Since 2012 That Have Raised Eyebrows
Scandalous Stories
Technology vendors are tasked with maximizing shareholder value, but sometimes their employees seem to lose sight of this basic fact. Rogue employees engaging in illegal or illicit activities can cause lasting damage to a company's reputation, in addition to being a source of embarrassment for their co-workers.
While not all tech industry scandals make lasting headlines, they can have a big impact. CRN here presents 7 examples of those that have grabbed the attention of industry watchers since the beginning of 2012 -- including some that might have flown under the radar for some people.
7. Polycom CEO Resigns Amid Expense Report Scandal
Polycom President and CEO Andrew Miller resigned suddenly in July 2013 after an internal investigation found "irregularities" in some of his expense reports. Wall Street didn't much like the sound of that, as Polycom shares dropped 15 percent in the wake of the news, wiping out some $273 million in market capitalization in speedy fashion.
Miller, who had been Polycom's CEO since 2010, took responsibility, and the vendor said the expense report issues wouldn't materially impact its earnings. Suffice to say, this wasn't one of Polycom's best moments.
6. The Ongoing HP-Autonomy Debacle
Hewlett-Packard paid more than $11 billion to acquire Autonomy in 2011, in what will easily go down as one of the most controversial tech industry deals ever. HP wrote down $9 billion from the deal in November 2012 and accused former Autonomy CEO Mike Lynch of not being up front about how much his company was actually worth.
Since then, HP and Autonomy have been squabbling back and forth about who's at fault for the disastrous deal. HP settled a class-action lawsuit from disgruntled shareholders in June, but former Autonomy CFO Sushovan Hussain challenged that ruling in August and alleged that HP was trying to cover up its mishandling of the acquisition.
HP laid its cards on the table in September with court documents containing details about its allegations against the former Autonomy executives. So we definitely haven't heard the last of this case.
5. Tech Data's Accounting 'Improprieties'
Tech Data announced in March 2013 that it had found "accounting improprieties" in its U.K. subsidiary and would be restating earnings for fiscal 2011, 2012 and 2013.
After an investigation, Tech Data in February lowered its stated revenue for the period by some $1.6 billion, while also lowering net income by $27 million, or 3 percent of its earlier reported figure.
Tech Data ended up firing some of the employees connected with the accounting issues, and it has instituted tighter accounting controls and hired an ethics officer, all in an effort to avoid a repeat occurrence.
4. Microsoft Raids Blogger's Hotmail Account In Trade Secret Theft Case
Microsoft likes to talk about how Gmail users are setting themselves up to be "Scroogled" by Google's information gathering. But an incident earlier this year showed that the software giant will look at Hotmail (now Outlook.com) users' emails if it feels they may be in possession of proprietary information.
Former Microsoft employee Alex Kibkalo was arrested in March for allegedly stealing Microsoft trade secrets and sharing that information with a French blogger. Microsoft ascertained this by searching the French blogger's account and determining that Kibkalo had sent him the proprietary data.
Microsoft's actions were legal, and the company said it would do the same in any future situation where it had reason to believe its trade secrets were at risk. At the same time, this ironic situation took some of the steam out of Microsoft's arguments that Google is a data-hovering behemoth.
3. FalconStor Pays $6 Million Fine In JPMorgan Chase Bribery Case
Storage vendor FalconStor settled a long-running shareholder class action lawsuit in January 2013 over bribes its executives offered to JPMorgan Chase, one of its customers, in 2010.
The bribes, offered by FalconStor founder ReiJane Huai and two sales reps, helped FalconStor close three contracts worth a total of $12.2 million between March 2008 and November 2009. FalconStor paid $5 million to settle the lawsuit.
2. Government VAR Strong Castle Blasted By Congress Over Alleged IRS Fraud
Strong Castle, a government IT solution provider, was criticized by Congress in June 2013 for allegedly using fraudulent tactics to get lucrative IRS contracts.
The U.S. House of Representatives Committee on Oversight and Government Reform questioned the solution provider's status as a service-disabled, veteran-owned small business.
The committee also alleged that a close relationship between Strong Castle President and CEO Braulio Castillo and IRS Deputy Director for IT Acquisition Greg Roseman "may have influenced the selection process."
1. RSA's NSA Back Door Denials
RSA, the security division of EMC, "categorically" denied a Reuters report last December that claimed the vendor has worked with the National Security Agency to include a back door in its widely used encryption toolkit.
According to Reuters, RSA had signed a "secret $10 million contract" with the NSA to include intentionally flawed encryption as the default option in its Bsafe developer toolkit to aid in surveillance activities.
RSA denied that this was the case, but the issue likely caused further damage to a vendor that was roundly criticized for its handling of a March 2011 attack on its SecurID two-factor authentication products.