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The SEC revealed today that it charged VMware with fraud

76 points by riadsila 4y ago

shrikant 4y ago
TBH I'm a bit underwhelmed by this fraud. I went in expecting some super-shady shenanigans only to see that VMware had done what literally all salespeople do when they have a capped upside in relation to their targets.
- Closi 4y ago
  Yes, and also on costs - who hasn't been in a company who tries to either pull cost forwards / backwards across financial years? This is effectively the same, just with revenue.
  - hef19898 4y ago
    And both are illegal ubder Sarbanes-Oxley for public US companies. SOX came into being after Enron went bust for, among other things, doing exactly that. Because it is a very easy way to cook your books. If a company is doing it, it mounts to fraud and is a red flag.
qzw 4y ago
Laws need to be written to hold the c-suite personally responsible for fraud. Otherwise there’s basically every incentive to commit fraud and consider it a cost of doing business. There’s a sitting U.S. senator with presidential ambitions who presided over the largest Medicare fraud in history when he was CEO of a healthcare company. He claimed ignorance and got off scott free.
- causi 4y ago
  We need a constitutional amendment guaranteeing that criminal fines must exceed the profit gained by unlawful action.
  - qzw 4y ago
    Would be a good start, but even then, if there's a low probability of getting caught, a lot of business people might roll the dice. There needs to be serious jail time for serious fraud.
  - im3w1l 4y ago
    I think it should be fine > min(money gained, damage caused) Say you have a sample worth billions that is about to expire and you do some speeding to get it delivered and analyzed in time. Then the fine should be in the hundreds not in the billions.
    - andreareina 4y ago
      Divide by the probability of successful enforcement
  - ixwt 4y ago
    I've been of the mind that it should START with any profits. Then the fine. It was a crime after all. They should be required to disgorge any gains, and then be penalized. I worry how hard it would be to calculate these numbers though. Especially with creative accounting. That could be another part of the fine though: the cost of the forensic accountants to determine profits.
    - thereddaikon 4y ago
      It should be both. The calculus needs to be reworked so that its never a more profitable move to break the law. That's why it keeps happening today after all, its just considered the cost of doing business. People should go to jail, the company should lose any gains it made from the action and there should be a fine on top. They should unequivocally be worse off because of it.
      - Loughla 4y ago
        Honestly, I have yet to hear a good argument for why people who commit fraud and other white-collar crimes shouldn't serve jail sentences. I also believe that strict sentencing for white collar crime (like we do for literally everything else) might actually be a deterrent. I have heard the argument that being overly punitive will force businesses to be too conservative in their dealings for fear of accidentally breaking the law, but I just don't buy that.
- roamerz 4y ago
  If he was in fact guilty I wonder if he joked around privately about getting off Scott free?
- jonahbenton 4y ago
  Might you say he got off rickscott free?
- mikeodds 4y ago
  Who out of interest?
  - genghisjahn 4y ago
    https://en.m.wikipedia.org/wiki/Rick_Scott https://en.m.wikipedia.org/wiki/Rick_Scott
- hrbf 4y ago
  Exactly this. As long as there are no painful personal consequences for fraud, this will keep happening. In this case, $8M is casually written off as cost of doing business. This is utterly insane.
- VoodooJuJu 4y ago
  A man needs a name
  - stingraycharles 4y ago
    Rick Scott, I assume. “ During his tenure as chief executive, the company defrauded Medicare, Medicaid and other federal programs. The Department of Justice ultimately fined the company $1.7 billion in what was at the time the largest health care fraud settlement in U.S. history.” https://en.m.wikipedia.org/wiki/Rick_Scott https://en.m.wikipedia.org/wiki/Rick_Scott
- lupire 4y ago
  Sarbanes-Oxley was supposed to do this. https://en.m.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act https://en.m.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act
deleted 4y ago
[deleted]
Mandatum 4y ago
Explains all the organisations requesting SOW’s to migrate.
spydum 4y ago
I suspect the reason is far more complicated: customers were also asking to defer sales starting in Q1 2020 due to pandemic complexities and fears. A lot of big corps will hold up delivery of HW and purchases to to align with their finance budgets and estimates.
- ineedasername 4y ago
  Heck car salesmen will do it if they plateaued on their bonus comp time and another car will shifted a day or two later to the next month will put them a bit ahead of meeting quotas for that next month. Of course they don’t have to file highly scrutinized financial statements for investors but I still can’t find much outrage for this or fault the SEC for not wasting resources better spent on more harmful fraud cases.
jstanley 4y ago
See also: https://news.ycombinator.com/item?id=32832999 https://news.ycombinator.com/item?id=32832999 "Sudden disturbing moves for IT in large companies, mandated by CEOs" > I have seen a lot of requests coming across about testing if my company can assist in some very large corporations [...] moving large numbers of VMs (100,000-500,000) over to Linux based virtualization in very short time frames. EDIT: But, having read the article, seems probably unrelated.
- calgoo 4y ago
  This might have added to the already reported issues around licenses etc. As the new licensing model will be subscription based, having 100,000 VMs might come in at quite a larger price point as well as switching it from OPEX to CAPEX expenses?
sh4rks 4y ago
That website is godawful to read on mobile. You can't close the popups that cover half the screen without getting sent to another page.
- sixhobbits 4y ago
  Looks great on Firefox mobile with Reader Mode on. Doesn't work everywhere but good for TC
- stavros 4y ago
  I usually can't even get to it due to the redirecting trackers that my browser blocks.
s1k3 4y ago
This seems rather vanilla. They’re just smoothing out their revenue to make the curve look a little better. This is a result of the fact that companies can’t have down quarters without massive stock implications.
- FredPret 4y ago
  Well, they can’t defraud their investors either. I won’t trust their books ever again - there are many ways to spin the numbers.
- throwoutway 4y ago
  Vanilla fraud is still fraud
twirlock 4y ago
sgjohnson 4y ago
Everything everywhere is securities fraud. https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
ineedasername 4y ago
As far as fraud goes this seems a variety that would have extremely little impact (if any) In terms of lost investor money. They shifted revenue toward the end off the quarter and booked it in the following quarter by delaying delivery. I’m not saying it was okay, it did present investors with in accurate information, but over a slightly longer period of time it wouldn’t really impact total revenue reported. Basically I’m having a hard time feeling much outrage for this, and the $8 million fine seems an appropriate penalty for a relatively low impact bit of fraud.
luispauloml 4y ago
> An investigation by the agency found that, “beginning in fiscal year 2019, VMware began delaying the delivery of license keys on some sales orders until just after quarter-end so that it could recognize revenue from the corresponding license sales in the following quarter [...] building a buffer in those periods and obscuring the company’s financial performance as its business slowed relative to projections." This seems very similar to what became known as "fiscal pedaling" in Brazil¹ when the government delayed repayment from Treasury to state-owned bank to hide increase in government expenses. This became the legal argument for the impeachment of the Brazilian president in 2016. ¹ https://en.wikipedia.org/wiki/Fiscal_pedaling https://en.wikipedia.org/wiki/Fiscal_pedaling
merricksb 4y ago
Discussed here two days ago: https://news.ycombinator.com/item?id=32818402 https://news.ycombinator.com/item?id=32818402 (205 points/66 comments)

76 points by riadsila 4y ago

TBH I'm a bit underwhelmed by this fraud. I went in expecting some super-shady shenanigans only to see that VMware had done what literally all salespeople do when they have a capped upside in relation to their targets.

Closi 4y ago
Yes, and also on costs - who hasn't been in a company who tries to either pull cost forwards / backwards across financial years? This is effectively the same, just with revenue.
- hef19898 4y ago
  And both are illegal ubder Sarbanes-Oxley for public US companies. SOX came into being after Enron went bust for, among other things, doing exactly that. Because it is a very easy way to cook your books. If a company is doing it, it mounts to fraud and is a red flag.

qzw 4y ago

Laws need to be written to hold the c-suite personally responsible for fraud. Otherwise there’s basically every incentive to commit fraud and consider it a cost of doing business. There’s a sitting U.S. senator with presidential ambitions who presided over the largest Medicare fraud in history when he was CEO of a healthcare company. He claimed ignorance and got off scott free.

causi 4y ago
We need a constitutional amendment guaranteeing that criminal fines must exceed the profit gained by unlawful action.
- qzw 4y ago
  Would be a good start, but even then, if there's a low probability of getting caught, a lot of business people might roll the dice. There needs to be serious jail time for serious fraud.
- im3w1l 4y ago
  I think it should be fine > min(money gained, damage caused) Say you have a sample worth billions that is about to expire and you do some speeding to get it delivered and analyzed in time. Then the fine should be in the hundreds not in the billions.
  - andreareina 4y ago
    Divide by the probability of successful enforcement
- ixwt 4y ago
  I've been of the mind that it should START with any profits. Then the fine. It was a crime after all. They should be required to disgorge any gains, and then be penalized. I worry how hard it would be to calculate these numbers though. Especially with creative accounting. That could be another part of the fine though: the cost of the forensic accountants to determine profits.
  - thereddaikon 4y ago
    It should be both. The calculus needs to be reworked so that its never a more profitable move to break the law. That's why it keeps happening today after all, its just considered the cost of doing business. People should go to jail, the company should lose any gains it made from the action and there should be a fine on top. They should unequivocally be worse off because of it.
    - Loughla 4y ago
      Honestly, I have yet to hear a good argument for why people who commit fraud and other white-collar crimes shouldn't serve jail sentences. I also believe that strict sentencing for white collar crime (like we do for literally everything else) might actually be a deterrent. I have heard the argument that being overly punitive will force businesses to be too conservative in their dealings for fear of accidentally breaking the law, but I just don't buy that.
roamerz 4y ago
If he was in fact guilty I wonder if he joked around privately about getting off Scott free?
jonahbenton 4y ago
Might you say he got off rickscott free?
mikeodds 4y ago
Who out of interest?
- genghisjahn 4y ago
  https://en.m.wikipedia.org/wiki/Rick_Scott https://en.m.wikipedia.org/wiki/Rick_Scott
hrbf 4y ago
Exactly this. As long as there are no painful personal consequences for fraud, this will keep happening. In this case, $8M is casually written off as cost of doing business. This is utterly insane.
VoodooJuJu 4y ago
A man needs a name
- stingraycharles 4y ago
  Rick Scott, I assume. “ During his tenure as chief executive, the company defrauded Medicare, Medicaid and other federal programs. The Department of Justice ultimately fined the company $1.7 billion in what was at the time the largest health care fraud settlement in U.S. history.” https://en.m.wikipedia.org/wiki/Rick_Scott https://en.m.wikipedia.org/wiki/Rick_Scott
lupire 4y ago
Sarbanes-Oxley was supposed to do this. https://en.m.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act https://en.m.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act

deleted 4y ago

[deleted]

Mandatum 4y ago

Explains all the organisations requesting SOW’s to migrate.

spydum 4y ago

I suspect the reason is far more complicated: customers were also asking to defer sales starting in Q1 2020 due to pandemic complexities and fears. A lot of big corps will hold up delivery of HW and purchases to to align with their finance budgets and estimates.

ineedasername 4y ago
Heck car salesmen will do it if they plateaued on their bonus comp time and another car will shifted a day or two later to the next month will put them a bit ahead of meeting quotas for that next month. Of course they don’t have to file highly scrutinized financial statements for investors but I still can’t find much outrage for this or fault the SEC for not wasting resources better spent on more harmful fraud cases.

jstanley 4y ago

See also: https://news.ycombinator.com/item?id=32832999 https://news.ycombinator.com/item?id=32832999 "Sudden disturbing moves for IT in large companies, mandated by CEOs" > I have seen a lot of requests coming across about testing if my company can assist in some very large corporations [...] moving large numbers of VMs (100,000-500,000) over to Linux based virtualization in very short time frames. EDIT: But, having read the article, seems probably unrelated.

calgoo 4y ago
This might have added to the already reported issues around licenses etc. As the new licensing model will be subscription based, having 100,000 VMs might come in at quite a larger price point as well as switching it from OPEX to CAPEX expenses?

sh4rks 4y ago

That website is godawful to read on mobile. You can't close the popups that cover half the screen without getting sent to another page.

sixhobbits 4y ago
Looks great on Firefox mobile with Reader Mode on. Doesn't work everywhere but good for TC
stavros 4y ago
I usually can't even get to it due to the redirecting trackers that my browser blocks.

s1k3 4y ago

This seems rather vanilla. They’re just smoothing out their revenue to make the curve look a little better. This is a result of the fact that companies can’t have down quarters without massive stock implications.

FredPret 4y ago
Well, they can’t defraud their investors either. I won’t trust their books ever again - there are many ways to spin the numbers.
throwoutway 4y ago
Vanilla fraud is still fraud

twirlock 4y ago

sgjohnson 4y ago

Everything everywhere is securities fraud. https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...

ineedasername 4y ago

As far as fraud goes this seems a variety that would have extremely little impact (if any) In terms of lost investor money. They shifted revenue toward the end off the quarter and booked it in the following quarter by delaying delivery. I’m not saying it was okay, it did present investors with in accurate information, but over a slightly longer period of time it wouldn’t really impact total revenue reported. Basically I’m having a hard time feeling much outrage for this, and the $8 million fine seems an appropriate penalty for a relatively low impact bit of fraud.

luispauloml 4y ago

> An investigation by the agency found that, “beginning in fiscal year 2019, VMware began delaying the delivery of license keys on some sales orders until just after quarter-end so that it could recognize revenue from the corresponding license sales in the following quarter [...] building a buffer in those periods and obscuring the company’s financial performance as its business slowed relative to projections." This seems very similar to what became known as "fiscal pedaling" in Brazil¹ when the government delayed repayment from Treasury to state-owned bank to hide increase in government expenses. This became the legal argument for the impeachment of the Brazilian president in 2016. ¹ https://en.wikipedia.org/wiki/Fiscal_pedaling https://en.wikipedia.org/wiki/Fiscal_pedaling

merricksb 4y ago

Discussed here two days ago: https://news.ycombinator.com/item?id=32818402 https://news.ycombinator.com/item?id=32818402 (205 points/66 comments)