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.