Cisco Systems has moved to deny allegations that it altered records and used straw buyers to cover up sales in Russia.
The company is already subject to an investigation by U.S. regulators related to its business in Russia, and is now accused of selling equipment to Russian government agencies while the country is subject to U.S. sanctions. Both the U.S. and the European Union hit Russia with sanctions due to the annexation of the Crimea and the ongoing crisis in Ukraine, writes Jeffrey Burt for eWeek.
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Falsified records cover-up illegal sales
An in-depth report by BuzzFeed alleges that Cisco set up ghost companies and submitted fake sales records in order to cover its tracks. Cisco’s offices in Russia are said to be responsible for running the scheme.
Company officials have since claimed that Cisco is “in complete compliance with the U.S. and EU sanctions on Russia.” BuzzFeed cites an anonymous source which alleges that straw companies were set up to hide sales to Russian government agencies such as the FSB. Documents seen by BuzzFeed corroborate these claims, but Cisco says that the incorrect customer names were just simple mistakes.
Technology such as that sold by Cisco is targeted by the sanctions due to the fact that it can be used for military purposes. The company canceled $1.7 million worth of deals in Russia after sanctions were imposed, but officials continued to try and work out a way around them.
Cisco could be investigated by SEC, again
One deal with the FSB was canceled, but then similar agreements were made with the Chamber of Commerce and the Industry of the Russian Federation. However the real buyer was still the FSB. The Chamber of Commerce was allegedly used as a straw buyer in multiple deals worth over $500,000, although a chamber official told BuzzFeed that it had made no agreements to buy Cisco technology.
Cisco has been affected greatly by the sanctions, with Russian operations reporting a 41% decline in quarterly revenue. This may be just the beginning for Cisco, with Sen. John McCain, R-Ariz., stating that the situation “deserves further investigation.” The U.S. Securities and Exchange Commission previously investigated the company due to allegations that it was winning business in Russia by bribing officials.
Cisco has previously come under fire for selling equipment in both Iran and China, and another investigation could place great pressure on senior figures at the company.