Datacenter CEO faked top-tier IT reliability cert to snag $10.7M SEC deal, DoJ claims

It's one thing to stretch the truth in your marketing material, but allegedly lying about your datacenter's qualities to lure the US Securities and Exchange Commission as a customer is a whole other matter. Deepak Jain, identified as the CEO of a Maryland IT services firm that goes unnamed in a grand jury indictment [PDF] made …

[Bitsminer]

[It's] unexplained is how the SEC fell for the scheme...

Perhaps you've heard of Bernie Madoff.

Less well known is the name Harry Markopolos, who warned the US SEC numerous times about Madoff, with no effect.

Draw your own conclusions.

[DS999]

Re: [It's] unexplained is how the SEC fell for the scheme...

Companies get scammed all the time in similar ways to the SEC getting scammed by this guy with his "tier 4" datacenter, or ignore warnings from stuff ranging to Boeing's MCAS to computer science professors emailing an e-commerce company about basic security malpractice in their product ordering website and getting ignored or sometimes even threatened legally.

Not sure why you think the government should be considered any less competent than private companies in such matters.

Honestly the Madoff thing was a failure of imagination. I don't think anyone in the SEC or anywhere else could believe that a guy who was legendary on Wall Street and had been operating for decades could be running a ponzi scheme, and it was the word of one guy who could easily be dismissed as a crackpot. It just didn't seem possible, and if it hadn't been for the 2008 crash there's zero chance anyone (including his investors) would have ever found out what was happening until he died. Maybe not even then, if his children had taken over and picked up where he left off. The Dow has more than tripled from its 2007 high before the crash to today, easily allowing for that ponzi scheme to have continued on its merry way until today and beyond.

[Richard 12]

Re: [It's] unexplained is how the SEC fell for the scheme...

You'd think someone would contact the certifying agency at least once before signing a $10,700,000 contract.

But then, it seems nobody does even the minimum of due diligence anymore.

[MiguelC]

Re: [It's] unexplained is how the SEC fell for the scheme...

Did you miss the part where it says Jain himself created the certifying agency? I'm sure he'd pick up the phone to speak to the SEC....

[Richard 12]

Re: [It's] unexplained is how the SEC fell for the scheme...

Not the one written on the certificate, the one that actually issues them.

Either they have the award in their database, or they know the sub-agency and can give you contact details.

Chain of trust has been a thing for a very long time.

[Anonymous Coward]

It's all about the paper trail

"[It's] unexplained is how the SEC fell for the scheme... "

It isn't. You take all paperwork at face value.

If the paper trail is according to the rules, then any investigation will be treated as a waste of time and money.

If the paperwork is fraudulent, it is not your fault as the recipient, but that of the criminal who send it. The misfortune is that the CEO had put his name somewhere in writing, I suppose. Normally, there is some non-natural "person" who is blamed, eg, the "company".

[collinsl]

Re: It's all about the paper trail

> Normally, there is some non-natural "person" who is blamed, eg, the "company".

Ah, but you're forgetting that companies are people according to US law.

[Pascal Monett]

Scamming the SEC for six years

Impressive.

Facing the rest of your life in jail at 49, not so much.

[Spazturtle]

Companies create their own certification bodies all the time to award themselves certificates, this is normal business practice. My own local council has created multiple certification bodies to award itself certificates about the quality of their social houses.

This prosecution is just the federal government trying to cover for their own failure to do due diligence.

[Vulture@C64]

It's not difficult to verify a certificate, especially when there is only one body certifying.

[Jon 37]

Or just read the name on the certificate saying who issued it, and realise it's not the one body you trust to issue certificates

[Doctor Syntax]

"Yesterday's charges make clear that the Criminal Division will not tolerate fraud schemes that threaten the security of the government's electronic data."

The contract was signed in 2012 & they're charging him in 2024? That's a lot of not tolerating>

[collinsl]

Probably because it was only possible to charge him after the end of the 10-year contract because they didn't want to pull out of it early or find another provider or they'd not got break clauses written into it or some such other nonsense.

[streaky]

Genius

I'm no expert, but it seems like defrauding a US federal law enforcement agency with criminal enforcement powers seems like a bad idea.

I mean if you do the thing they're supposed to be law enforcing against you're going to get a speeding fine and nothing even close to what they're supposed to be doing - but actually directly defrauding *them* so they are the direct victim as opposed to, y'know, people who own stock in things, pension funds etc, it won't end well for you.

[Alan_Peery]

Re: Genius

"Oh, it will be OK. We'll fix it al up after the contract signing."

"What do you mean I can't have my bonus if we do the necessary upgrade? I worked really hard to land that sale..."

[disgruntled yank]

Odd

Ms. Argentieri states that "Jain allegedly sought to enrich himself [etc.]". Isn't DoJ Criminal Division the entity alleging this?

[collinsl]

Re: Odd

Yes however she can't say that "Jain sought to enrich himself" because it's not been proven yet in court. A better phrasing may have been "We're alleging that Jain sought to enrich himself" or "We contend that Jain sought to enrich himself" etc.

[Valeyard]

"Yesterday's charges make clear that the Criminal Division will not tolerate fraud schemes that threaten the security of the government's electronic data."

6 years of tolerating this very fraud scheme notwithstanding, of course

[Glen Turner 666]

You absolutely have to go through a datacentre yourself with a checklist. Certifications fail to capture some important aspects of datacenters -- car parking, ability to take deliveries in a sane way, billing structures for cross-connects and other ancillary services. Marketing materials often refer to the completed state of the datacentre, which might take several years to achieve; the current reality can be much more sparse.

One datacentre I looked at had rooms for the second set of generators, but no generators installed. You need to walk the site, viewing every feature of the datacentre in their marketing, and every requirement in your RFQ.

[Alan_Peery]

Elevators large enough to take the equipment to upper floors...

Rack of the right dimensions to fit your preferred supplier, and all the other suppliers...

[CrazyOldCatMan]

Hmmm..

Deepak Jain and his company performed fully under the SEC contract. There is no evidence that any data was lost or compromised in any way. Mr Jain is an innocent man who looks forward to confronting these charges at trial

So no contesting that he committed fraud, faked data to obtain contracts illegally or generally acted like a scumbag/Tory Minister then?

Just a "nothing bad happened after he committed fraud yer honour so he's innocent".

I think, legally (IANAL) that's called, "not having a leg to stand on when your attourney can't even dispute the basic charges"