AAPL Company

Apple salesmen took SEC for a million dollar ride

9to5 Staff | May 25 2011 - 2:30 pm PT

An Apple salesman “convinced” the Securities and Exchange Commission that it would be in their best interest to buy storage gear from both his company and Cloverleaf Communications, another party specializing in data storage solutions for big clients. The agency greenlighted the purchase of a million dollar worth of items from both Apple and Cloverleaf and carried out the transaction in the summer of 2008. The deal was essentially a no-bid contract as SEC didn’t seem fit to seek out alternative bids from more established storage vendors. That’s the gist of an internal investigation by the agency’s inspector general David Kotz who has been snuffling around SEC’s procurement practices, reports Reuters.

According to the investigation, an Apple salesman convinced the agency that Cloverleaf could provide a cheaper solution to the agency’s data storage and backup woes. Kotz also found the SEC improperly shared budget information with Apple and went ahead with purchases before getting proper approval and before performing reviews.

Real problems began when the products arrived. The SEC was “beset with problems” when it tried using the equipment. “Bugs” in the installation were spotted that had not been worked out. As a result, the entire thing “went downhill”, Kotz wrote in his report. However, when SEC employees pointed out that the $1 million gear was literally useless, bosses lashed out at them, warning them that “this information doesn’t leave this room”.

Did the iPhone maker intentionally dump their outdated equipment on the SEC and profit in the process? And what exactly do Apple and Cloverleaf have in common?

Apple and Cloverleaf are buds of sorts, with the latter acting in the past as a partner in Apple’s Enterprise Solution efforts. Cloverleaf is one interesting firm. They were spun off from an affiliate of Israel Aircraft Industries in 2001. Headquartered in the US, Cloverleaf keeps their research and development facility in Israel.

The company raised $25 million in private equity funding from the likes of Bank of America, Genesis Partners and Hyperion Israel Venture Partners and was acquired by Dot Hill Systems in 2010. Apple itself has been on a shopping spree for storage equipment for some time.

Their North Carolina facility, one of the biggest datacenters in existence, has stunned the world and has been tantalizing the press ever since. No-one quite knows what it’s for as Apple’s been mum on its purpose besides confirming that it should become operational before summer. The gadget king is also thought to be building super datacenters all over the world. In addition, Apple reportedly bought twelve million gigabytes of storage from Isilon Systems for an undisclosed sum, a Seattle, Washington-based maker of clustered storage solutions company that sells storage products to more than 1,500 clients.