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Apple implicated in SEC scandal valued at $1 million

updated 06:10 pm EDT, Wed May 25, 2011

Apple salespeople wasted taxpayer money, says SEC

Apple exploited government mistakes to increase the company's profits, an internal probe by the Securities and Exchange Commission notes. Several years ago, when it was chaired by President George W. Bush appointee Christopher Cox, the SEC was looking to escalate its integration of high technology. An Apple salesman persuaded the SEC to choose the company's systems, and by 2008 Apple is said to have got unchecked authorization to make large numbers of purchases, which it took advantage of. Federal regulations require that such purchases be reviewed and approved.

Exacerbating the situation, the same Apple salesman reportedly persuaded the SEC to use a data storage company called Cloverleaf Communications, with which Apple had links. Even though the SEC had no experience with Cloverleaf it entered a no-bid contract, ignoring procedures on the assumption it would get good results.

The SEC's present Inspector General, David Kotz, writes that once the organization began testing its new services and hardware, it encountered numerous problems and got little sympathy from either Apple or Cloverleaf's new parent company, Dot Hill Systems. It was only two years later that Kotz -- under President Obama-appointed SEC chairwoman Mary Schapiro -- started unearthing the root of the SEC's problems. The failed project cost US taxpayers at least $1 million, most of which was pocketed by Apple and Cloverleaf, says Kotz.

Cloverleaf in particular was a bad choice because it was "more expensive than other, better-known and less risky alternatives," the inspector's report reads. Both Dot Hill and Apple have refused to comment. SEC spokesman John Nester, meanwhile, has said the agency is taking steps to improve policies and controls for IT purchases, including reviews by technology and business oversight committees before committing to an order.

Congressional Republicans could potentially use the probe, which has targeted other instances of SEC waste, as a political weapon. Reuters comments that it may provide an excuse to deny extra money to the SEC, in turn a tactic some Republicans are pursuing to prevent the implementation of Dodd-Frank financial overhauls.

by MacNN Staff



  1. Bobfozz

    Joined: Dec 1969


    A million $$$?

    I wouldn't be surprised if this probe cost more than that.

    Something doesn't smell right about this.

  1. prl99

    Joined: Dec 1969


    not Apple's problem

    The problem here is with the SEC person, not Apple. All Apple did was sell them products and it was up to the SEC person to make sure all their rules were followed. As far as it being a scandal, what about all the Microsoft sales that are sole-sourced and not put out to bid? Just because you already have Microsoft products doesn't mean you can get away without looking at alternatives.

  1. Flying Meat

    Joined: Dec 1969


    incompetent SEC appointee?

    "appointee Christopher Cox" or that organization's purchasing director. Who knows.

    Its not Apple, or for that matter Dot Hill.

    Comment buried. Show
  1. facebook_Clarence

    Via Facebook

    Joined: May 2011



    What a bunch of crooks!

  1. shawnde

    Joined: Dec 1969


    Republicans ....

    So Republicans are gonna use this as "political weapon" ??? Wasn't the crook appointed by a crooked REPUBLICAN PRESIDENT ????

    Or is it that whenever they hear the word "weapon" the wanna jump the gun (so to speak) ???

    The irony is striking :-)

  1. chas_m



    Shame to go around

    Shame on Apple (or at least the Apple salesperson in question) who took advantage of lax oversight.

    Shame on the Bush administration for their poor oversight and lack of controls. This is a peanuts snookering compared to some of the other bad deals they entered into, but shows the problem of lax regulation was systemic.

    Bravo to the present SEC Inspector General and Chair for finding this abuse and waste and documenting it. Let's hope the guilty parties get brought to account (for a change).

  1. macjockey

    Joined: Dec 1969


    Pocket Change

    Pocket Change

  1. testudo

    Joined: Dec 1969


    Re: Republicans ....

    So Republicans are gonna use this as "political weapon" ??? Wasn't the crook appointed by a crooked REPUBLICAN PRESIDENT ????

    But that's not the point. It was discovered by the current administration, so it was their fault. Duh.

    Anything that will close down the SEC faster is a good thing. Just look at all the recent downturns in the economy or failed businesses(Enron, mortgage and debt crises, Bernie Madoff), all caused by the SEC and their silly rules and regulations. These enterprises would still be going strong and earning good money if not for the SEC!

  1. GopherAlex

    Joined: Dec 1969



    SEC were probably too busy surfing p*** to attend to all the details...

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