R v Waldron (No.3)

[2024] NSWDC 159

District Court

New South Wales

Medium Neutral Citation:

R v Waldron (No.3) [2024] NSWDC 159

Hearing dates:

5 February 2024 – 17 April 2024

Date of orders:

8 May 2024

Decision date:

08 May 2024

Jurisdiction:

Criminal

Before:

Mahony SC DCJ

Decision:

Verdicts of guilty to Counts 1 to 10 on the Indictment

Catchwords:

Corruptly receiving, as an agent, money as a reward for facilitating business opportunities (7 Counts); aiding and abetting an agent to corruptly receive money as a reward for facilitating business opportunities (3 Counts)

Legislation Cited:

Crimes Act 1900 (NSW)

Criminal Procedure Act 1986 (NSW)

Evidence Act 1995 (NSW)

Cases Cited:

Allied Pastoral Holdings Pty Ltd v The Commissioner of Taxation [1983] 1 NSWLR 1, 44 ALR 607

Browne v Dunn (1893) 6 R 67

Khamis v R [2010] NSWCCA 179; 203 A Crim R 121

Mehajer v R [2014] NSWCCA 167; 244 A Crim R 15

MWJ v R (2005) 80 ALJR 329; [2005] HCA 74

Category:

Principal judgment

Parties:

Jon Gordon Waldron (Accused)
Director of Public Prosecutions (the Crown)

Representation:

Counsel:
Mr P Lange (Accused)
Mr D Morters SC (the Crown)

Solicitors:
P Gibson (Accused)
H Pais (the Crown)

File Number(s):

2015/90725

INTRODUCTION

Overview of the Crown Case

Evidence of the witnesses called in the Crown case

Evidence of Ian Mark Narev

Evidence of Mr Andrew Goldstein

Evidence of Mr Keith Robert Hunter

Evidence of Christopher Kelada

Evidence of Mr David Bradbury

Evidence of Mr Marcus Nicholson

Evidence of Mr Thomas Richardson

Evidence of Mr Tom Pennington

Evidence of Mr Zahid Arain

Evidence of Mr Keith Buckley

Evidence of Mr Matthew Smith

Evidence of Ms Alexandra Drury

Evidence of Mr Geoffrey Fuggle

Evidence of Ms Judy Cole

Evidence of Mr Tim Whiteley

Evidence of Ms Kate Brown

Evidence of Darren Murphy

Evidence of Mr Adam Harrison

Evidence of Frank Martinez

Evidence of Mr Bradley Twynham

Evidence of Mr Michael Marsden

Evidence of Dr Allan Watt

Summary of evidence in the defence case

Evidence of Mr Jon Waldron

The Crown address

The accused’s address

Directions of law

Elements of Counts 1 to 7

Counts 8, 9 and 10

Liberato direction

Identification of factual issues

Facts agreed by the parties

Contractual Arrangements between CBA and SMI

CBA Records

CSC Records

Funds Transfers

International Movements

Chronology of relevant events

Findings of fact

Determination

Orders

INTRODUCTION

1. On 5 February 2024 the accused pleaded not guilty to the following 10 Counts on the Indictment:-

1. On or about 16 May 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$99,971.02, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia

2. On or about 29 July 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$199,980.26, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

3. On or about 8 August 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$299,980.40, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

4. On or about 4 November 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of $300,000.00 as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

5. On or about 12 November 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$300,000.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

6. On or about 10 December 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US $350,000.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

7. On or about 16 December 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$350,000.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

8. On or about 7 August 2014, at Sydney in the State of New South Wales, did aid and abet Keith Hunter, being the agent of the Commonwealth Bank of Australia, to corruptly receive a benefit, namely a credit in a bank account in the sum of US$330,000.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

9. On or about 27 August 2014, at Sydney in the State of New South Wales, did aid and abet Keith Hunter, being the agent of the Commonwealth Bank of Australia, to corruptly receive a benefit, namely a credit in a bank account in the sum of US$149,990.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

10. On or about 23 September 2014, at Sydney in the State of New South Wales, did aid and abet Keith Hunter, being the agent of the Commonwealth Bank of Australia, to corruptly receive a benefit, namely a credit in a bank account in the sum of US$149,990.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

2. Counts 1 to 7 concerned allegations that the accused received payments alleged to have been corruptly received by him pursuant to s249B(1) of the Crimes Act 1900 (NSW) (“the Crimes Act”). Counts 8 to 10 concern allegations that the accused aided and abetted Keith Hunter to corruptly receive payments pursuant to s249B(1) and s249F(1) of the Crimes Act.

3. On 24 October 2022 on the application of the accused Judge Williams ordered that the trial proceed by way of Judge alone pursuant to s132 of the Criminal Procedure Act 1986 (NSW).

Overview of the Crown Case

4. The Crown case is that both the accused and Mr Hunter were at all material times employed by the Commonwealth of Australia (“CBA”) in senior positions in technology, operations and IT engineering. They reported to a Mr Michael Harte who was employed as the Chief Information Officer (“CIO”) at the bank. In 2011 Mr Hunter was employed as the Executive Manager in charge of Operations, IT Security, Application Development and IT Engineering, reporting directly to Mr Harte.

5. On 31 May 2012 the accused was employed by CBA as General Manager of Infrastructure Engineering, reporting directly to Mr Hunter.

6. In 2012 the CBA under Mr Harte’s direction adopted a policy of transformation of its computing systems to cloud technology. The policy was known as ES2012.

7. In 2009 ServiceMesh Inc. (“SMI”) started supplying software services to the CBA. In 2011 SMI signed a Master Service Agreement (“MSA”) with CBA. Pursuant to that agreement SMI supplied software services known as “Agility Platform” to the CBA as the cornerstone of its cloud computing system.

8. SMI was based in Los Angeles, USA. The principal shareholder was Mr Eric Pulier. SMI employed Mr Bradley Twynham as a sales consultant in February 2010 to manage the corporation's relationship with CBA in Australia. The Crown case is that the accused developed a close working relationship with both Mr Pulier and Mr Twynham.

9. In October 2013 SMI entered into an Equity Purchase Agreement (“EPA”) with Computer Sciences Corporation (“CSC”) for an agreed purchase price of US$291 million and a first payment of US$93 million. The EPA provided that, during an earnout period between 1 January 2013 and 31 January 2014, if SMI achieved revenue exceeding US$20 million CSC would pay SMI's shareholders an additional “earnout payment” equal to approximately 10 times that additional revenue.

10. The Crown alleges that contracts entered into between CBA and SMI in December 2013 (“The McAfee deal” comprising TDS 19 to 21) and January 2014 (“The Pivotal deal” involving TDs 17, 22 to 29) were facilitated by the accused and Mr Hunter to enable SMI to increase its revenue during the earnout period above US$20 million, to the benefit of SMI shareholders who received an earnout payment of over US$98 million. The recipient of the largest proportion of that payout was Mr Pulier.

11. The Crown case is that Mr Pulier made payments in 2014 via a Mr Goldstein, or a corporation registered by him (“ACE Inc.”) to both the accused and Mr Hunter as a reward for their ensuring the contracts with CBA were made within the earnout period; that the 10 payments subject of the Counts on the Indictment were received without the knowledge of CBA and were received corruptly by the accused (in respect of Counts 1 to 7); and that the accused aided and abetted Mr Hunter to receive corruptly the payments subject of Counts 8 to 10.

12. The evidence in the trial concluded on 26 March 2024. The trial was adjourned to allow the parties time to prepare written submissions. The addresses were heard on 9 and 10 April 2024.

Evidence of the witnesses called in the Crown case

13. Evidence of William Deckelman Junior

14. Mr Deckelman is the Executive Vice-President and General Counsel at DXC Technology Company which is an amalgamation of two former computer companies namely, Computer Sciences Corporation ("CSC") and HPE Enterprises. He gave evidence about the acquisition by CSC of SMI in October 2013. Exhibit F was an email dated 21 October 2013 attaching documents relevant to the contract including an exclusivity letter agreement dated 16 October 2013, this was referred to as a term sheet. Annexed to it was a sales “pipeline” schedule prepared by Salesforce which outlined the potential revenue earning contracts for SMI.

15. Mr Deckelman gave evidence of the agreed purchase price of US$291 million together with an earnout period of 13 months from 1 January 2013 to 31 January 2014 which would allow for additional consideration depending on revenue earned by SMI. The earnout payment was in respect of revenue in excess of the US$20 million threshold with a maximum earnout opportunity of US$135 million. The earnout payment was calculated by way of a multiplier applied to revenue recognised in excess of US$20 million. The multiplier amount was a factor of approximately 10 applied to each dollar in excess of US$20 million revenue.

16. The purpose of the Salesforce pipeline was to give CSC the ability to understand how large the pipeline was when they were negotiating the maximum cap on the earnout payment. It identified five projects which were nominated as being in the pipeline for SMI with respect to CBA.

17. The witness identified the EPA executed on 29 October 2013 (Exhibit E, Vol. 1, pg.325).

18. The witness identified at Exhibit E, pg.467 a stock register for the equity shareholders in SMI indicating how many shares and calculating the percentages of entitlement to the earnout payment. The schedule indicated a payment to TechAdvisors LLC (“TA”) of US$5,618,331.86. The earnout payments were made in February 2014, following validation of the contracts in this case by CBA.

19. The witness gave evidence of the total earnout payment was US$98,034,058 which included recognition of revenues by SMI from the McAfee deal and the Pivotal deals with CBA. The revenue recognised from those contracts was US$5,022,542 and US$5,404,084 respectively.

20. In cross-examination Mr Deckelman confirmed the contractual negotiations leading to the EPA. The initial terms of sale dated 9 September 2013 did not include an earnout payment. He agreed that an earnout provision first appeared in a term sheet dated 16 October 2013 and subsequent to the EPA dated 29 October 2013, CSC had agreed to increase both the consideration in the EPA and the cap on the maximum earnout payment.

21. Mr Deckelman agreed that the Pivotal deal was not recorded in the Salesforce Pipeline document, nor was the McAfee agreement. He gave evidence that both transactions were added to the earnout late in January by Mr Pulier. Neither contracts were in the Salesforce Pipeline report and therefore not contemplated by the EPA.

22. Mr Deckelman gave evidence that the two transactions were included after discussions between CSC and Mr Pulier. He agreed that the EPA did not contemplate their inclusion however CSC had agreed to it and once the CBA agreed it became part of the earnout.

23. Mr Deckelman was challenged about that evidence as follows:-

Q. That's right, but the question is, this document does not refer to the earn out in any way, does it?

A. I believe you're correct.

Q. It doesn't ask for confirmation that the contracts generate revenue capable of recognition pursuant to the earn out clause, does it?

A. No.

Q. That wasn't the purpose of this document; correct?

A. Again, the purpose of the document was to do exactly what was contemplated by the purchase agreement, to validate the accounts were validate agreements with the customers that ServiceMesh claimed it had signed contracts with, and, here, to my point earlier, January 28, very much last minute, as I recall, these documents were signed with CBA and this is what we asked to have certified.

Q. But why, when the earn out provision did not provide for recognition of those contracts in terms of the calculation of the earn out revenue?

A. But because the parties, obviously, between the date of the equity purchase agreement and closing had added these contracts. In fact, Mr Pulier and CBA, Mr Waldron, are the ones who signed these agreements and wanted them included as part of the earn out with the confirmation from CBA that they were valid contracts. We agreed to include them in the earnout and that's exactly what the documentation shows.

Q. Firstly, Mr Waldron didn't sign any of these contracts, did he?

A. I don't know. I meant the letter. I believe he signed the letter.

Q. You said, "The parties obviously agreed." What do you mean by the word "the parties obviously agreed"?

A. Because, again, you took me through the document at closing and it's clear that these agreements were included in the calculation of the earn out. In fact, as I recall, this is the way the $20 million threshold was met and this is why the earn out was paid in the first place. So, clearly, the shareholders were happy to have it included and it was agreed and it was done and documented.

Q. Can I suggest to you that you're assuming what happened since the payout included contracts which were not contemplated as being recognised in the earn outs revenue calculation?

A. During the equity at the time of the equity purchase agreement, that's true, but there's no other explanation as closing that it was included and it was agreed to by the parties and they took the money. So, it was clearly an agreement that was done as part of closing.

Q. Might another explanation simply have been an error on the part of CSC accounting?

A. No.

Q. Why not?

A. Absolutely not, because we had so many auditors and there was so critical for both - for all the parties involved, that it was very, very carefully prepared and reviewed and you're saying that CBA mistakenly sent us the letter confirming these agreements? I don't think so.

24. Mr Deckelman gave evidence that the CEO, CFO and himself were involved in the process of recognising the two sets of contracts. He gave the following evidence:-

Q. Why did CSC agree to recognise these two sets of contracts?

A. Because we were told they were valid contracts with an important customer, CBA. And CBA, through Mr Waldron, represented to us that these were valid contracts. It was during the earn out period, we were willing to accept those even though they weren't contemplated back at the time of the purchase agreement, it was part of a - a fair process and a careful process that was audited and so, we agreed to do that.

25. He then gave the following evidence:-

Q. You agreed before that it was an important decision for CSC to agree to pay effectively gratuitously - my word, not yours $100 million; is that right?

A. It is definitely your word, I would disagree with that. It was - yes, again, I'll I'll repeat what I said: it was a business decision to accept the CBA contracts that were represented to us to be valid contracts with CBA, and yes, that allowed for the earn out to be paid. We were willing to do that, that was a fairly negotiated, that was part of the - the deal, and we accepted to do that. And it was a perfectly valid business decision to do it.

Q. And when did that decision take place?

A. Sometime around January 28 when the contracts were signed with CBA.

26. It was put to Mr Deckelman that he was reconstructing what must have happened leading to CSC paying out on the two contracts which were not contemplated in the acquisition agreement which he denied.

Evidence of Ian Mark Narev

27. Mr Narev was employed by the CBA as Managing Director and Chief Executive Officer from December 2011 until April 2018. He gave evidence that Mr Michael Harte was employed by the CBA as Chief Information Officer. The total number of people within his area of responsibility was in the magnitude of 5,000, including the accused and Keith Hunter.

28. Mr Narev gave evidence that Mr Harte was brought into the bank to drive innovation and that he promoted a move in the bank to a cloud computing platform.

29. Through the witness Exhibit 3 was tendered, the Commonwealth Bank of Australia Statement of Professional Practice. It included, under the heading “Outside Employment and Appointments” the following:-

“You may obtain supplementary employment of occupations outside the Bank, or hold honorary positions in clubs, charitable organisations etc, provided that performance of your Bank duties is not affected adversely, such employment or occupation does not in any way reflect adversely on the Bank and does not conflict with your duties to the Bank.”

Evidence of Mr Andrew Goldstein

30. Mr Goldstein gave evidence that he was President of a corporation ACE Inc., which was incorporated in the State of Delaware on 9 May 2014. It subsequently changed its name to ACE Foundation.

31. Mr Goldstein had conducted a search for documents being Statements of Work and invoices associated with Digisol and the accused. He provided a list referring to 13 files in a folder named “Waldron/Digisol”. Another folder named “Hunter” contained 4 files. He provided a schedule of documents which became part of Exhibit N in the proceedings. These comprised Statements of Work dated 21 July 2014 and 1 December 2014 from the accused, priced at $1.4 million and $1.05 million respectively, and invoices dated July 21, August 4, September 1, October 6, November 1 and December 1 and 15, 2014 on the letterhead of Digisol, a business name used by the accused. Also attached were Statements of Work for Keith Hunter dated 5 May 2014 (two), June 4 2014, and July 11, 2014 together with invoices dated 4 and 5 August 2014 and August 22, 2014 for the sums of $330,000, $330,000 and $150,000 respectively (a total of $810,000).

32. In cross-examination Mr Goldstein confirmed that he was requested to provide all records pertaining to Jon Waldron and Keith Hunter to investigators through US authorities. He did not produce any emails and gave evidence that he deleted all the emails back in 2015. He gave the following evidence:-

Q. You produced some documents, however; correct?

A. That's right.

Q. Can I ask you where you found those documents?

A. I have them in a folder on my laptop that I had copied retained from the computer that I was using back in 2014.

Q. When you say you copied them off a computer, were they stored in a directory, were there other things in that directory, what can you tell us about the location where you found them?

A. Yeah, there is a directory called Ace Subdirectories for all of the vendors and other material to, and so it was very easy for me to find the subdirectory that had digital material.

Q. Can I ask you how would you describe your recordkeeping back in 2014?

A. Inconsistent.

…

Q. You say inconsistent, what do you mean by that?

A. Well, I was the financial records, the records of operational spending were excessively detailed, postage, things like that, for Ace's operations, but the records for important stuff sometime - I just wasn't good about keeping or organising that stuff.

33. In re-examination Mr Goldstein gave the following evidence:-

Q. You said in answer to one of my learned friend's questions about why it was that you weren't able to retrieve emails and that you deleted all those emails back in 2015.

A. Mm hmm.

Q. Why did you do that?

A. I was nervous about - I understood that there was an investigation going on and I was nervous about what it meant by me and - so I rashly deleted them.

Evidence of Mr Keith Robert Hunter

34. Mr Hunter was employed by the CBA in July 2011 and had about 25 years’ experience in technology operations. He gave evidence that Mr Michael Harte had a strategy to move the CBA’s computing to cloud computing thereby reducing the overall cost of its computing requirements. He became the head engineer on the CBA’s cloud computing environment and identified Mr Bradley Twynham as SMI’s Australian salesman.

35. Mr Hunter gave evidence of his regular contact with Mr Eric Pulier which concerned the contractual arrangements between SMI and the CBA. He gave evidence that by September or October 2013 he knew that Mr Pulier was in talks with CSC for the acquisition of SMI and that Mr Harte had expressed concerns about the company buying SMI continuing to support CBA.

36. Mr Hunter identified a diagram (Exhibit E, Vol. 5, pg.1966) which he had drawn for investigating police on 31 March 2016 which represented a document Mr Harte gave to him during a discussion about the type of compensation they should receive from SMI by helping them grow the company. He gave evidence that he showed the document to the accused and then travelled to the United States where he showed the document to Mr Pulier. He told Mr Pulier that he had been discussing compensation with Michael Harte. He left the original diagram with Mr Pulier who said he would take it under consideration.

37. Mr Hunter agreed that on 31 October 2013 the accused sent an email with the heading “RE: CSC acquires ServiceMesh” (Exhibit E, Vol. 3, pg.1328). On the same day the accused communicated that SMI providing McAfee software to CBA will increase SMI’s revenue by $7 million dollars.

38. Mr Hunter gave evidence that from time to time Mr Pulier had made comments such as “I’m going to help you guys” or “I’m going to look after you guys” in the presence of the accused.

39. Mr Hunter gave evidence that he was aware that there would be a benefit to SMI as a consequence of signing the procurement contracts TDs 17 and 22 to 29 on 25 January 2014. He had discussions with Mr Waldron about signing those contracts to ensure they met the time period for the earnout.

40. Mr Hunter gave evidence that there was some urgency to execute the McAfee deal prior to the end of December 2013. Mr Hunter had received an email on 6 January 2014 in respect of Mr Pulier getting nervous about “the remaining TDs” (the Pivotal TDs). Mr Pulier had told him that “time is running out.”

41. Mr Hunter gave evidence that in 2014 he and the accused had discussions with Mr Pulier about what type of compensation they would be receiving. He gave evidence that the accused had told him that following a meeting with Eric Pulier, he would be receiving US$750,000. He gave further evidence that the accused had inferred that he, the accused and Mr Harte would each be receiving the same amount. He gave further evidence that he had expected the amount would be more, around a million dollars and that he had expressed disappointment at the final number “because all we’ve been through and the risk we put ourselves at.”

42. His first payment was received through the accused who told him that he had received $100,000. From that amount $20,000 was sent to his sister in the United States. He gave evidence that he received two further payments of US$300,000 each and then identified a transfer to his Bank of America account on 7 August 2014 in the sum of US$330,000 from ACE and two further transfers on 28 August and 24 September 2014 of $US149,990, totalling US$630,000. Together with US$20,000 transfer to his sister the total he received was US$650,000. He gave evidence that he never received the additional US$100,000 to make it up to US$750,000.

43. Mr Hunter gave evidence that the accused had told him that he was going to send Andrew Goldstein documents about working on how to build a data centre in a box so that it was transportable and self-contained. The documents were work orders and they would do an invoice for payment. When asked whether he had done any work in support of invoices that Mr Waldron sent on his behalf he said there were discussions on the topic and reading some documentation but that the time spent was minimal namely a “couple hours”.

44. Mr Hunter gave evidence that he was sending the documents to ACE because ACE needed backup information to process the payments which he understood was for his compensation from the sale. He and the accused had discussions about the payments being for compensation. He gave evidence that he never did any work for ACE. Nor did he send any documentation to them.

45. Mr Hunter gave evidence that during his interview with CBA investigators he had told them that payments received were for consulting work. He had provided that explanation after he, the accused and Eric Pulier had discussed it.

46. The documents sent by him to ACE Inc. are part of Exhibit G. The accused had told him that he should not share the documents with the CBA's investigators.

47. Mr Hunter gave evidence that during his second interview with the CBA investigators he was told that they had discovered through forensic examination that the creation of the documents post-dated the first interview and he was escorted out of the building. He agreed that he did not tell them the truth about his involvement with ACE during the second interview. His laptop and iPad were seized and Exhibit H comprised messages between himself and the accused on 17 December 2014.

48. Exhibit K was a 3-page Statement of Work dated 20 June 2014 sent to him by the accused when he asked for something to use to make his own Statement of Work. Mr Hunter gave evidence that his bank account information was conveyed to ACE by him providing it to the accused who then sent it on to ACE.

49. Exhibit L were agreed facts on which Mr Hunter was sentenced on 20 December 2016.

50. Mr Hunter was cross-examined extensively. He conceded that he gave the CBA a misleading statement in December 2014 and that he created and modified fictitious Statements of Work and emails to mislead CBA investigators.

51. Mr Hunter agreed that it was not right to say that the transaction with the McAfee TDs involved the acquisition of unnecessary products or services. He gave the following evidence about the Pivotal TDs:-

Q. Again, it would not be right to say that you used your position to purchase unnecessary products and services from ServiceMesh in relation to the Pivotal TDs; correct?

A. No, I mean, we were going to be using their product and we were going to be using ServiceMesh to help us integrate it.

Q. I suggest that even though you thought that these transactions, that is, McAfee and Pivotal, were of benefit to the bank, you were prepared to be sentenced on the basis that the transactions were in respect of overpriced and/or unnecessary products and services; is that not right?

A. At the time, I - at the time, I, quite bluntly, I was not in a very good - great state of mind and I might have misunderstood what was in that, but I would say that, as far as overpriced, it's hard for me to say whether it was overpriced or not. So, I would have to reply yes to you on that, sir.

52. Mr Hunter agreed that he had received a discount on his sentence on the basis of future assistance namely, that he would give evidence in the trial against the accused. He was on medication for anxiety and depression but at the time of his interview by CBA investigators he was on anti-depressants but not suffering from anxiety. He agreed that his ability to remember facts and details was at various times affected by his physical and mental state.

53. Mr Hunter was asked about the six statements he had given to the police. He acknowledged that proceedings had been brought against him in the Central District Court of California and that he was contractually bound not to deny directly or indirectly any of the allegations contained in a document resolving those proceedings (Exhibit 8).

54. Mr Hunter was cross-examined on his work history and experience and his recruitment by the CBA. He was employed to assist Mr Harte to build and expand a cloud computing environment and he had a significant budget of $1.2 billion. He gave evidence that in 2013 Mr Harte was trying to break up the CBA's reliance on Hewlett-Packard, and the removal of the McAfee security software from the HP contract and its assignment to SMI was consistent with Mr Harte’s goals.

55. Mr Hunter was cross-examined about his evidence of a meeting he held with Mr Harte in October 2013 when Mr Harte drew a diagram. He agreed the meeting could have been earlier or later, and that the purpose was to discuss bank business generally. The issue of compensation was discussed towards the end of the meeting. He gave the following evidence:-

Q. How did he introduce it to you, that is the topic of compensation?

A. Well, we were talking - we were talking about the options that could happen with - with the sale and/or going public of ServiceMesh and that's where it came up.

Q. I'd like to ask you some questions about that. You talked about the options in the event of a sale or going public of ServiceMesh. Is that right?

A. Correct.

Q. Can I infer that at that stage, you didn't know that ServiceMesh was being acquired by CSC?

A. That's correct.

Q. Because you were discussing with Mr Harte what might happen if ServiceMesh were acquired or decided to list on a stock exchange. Is that right?

A. Correct

…

Q. Coming back to the options, you and Mr Harte were discussing who might be potential corporate suitors for ServiceMesh. Is that right?

A. Yes.

Q. What was said then, after those names were mentioned?

A. Again - again, it was a conversation about the different vendors out there that certainly would have the capability of purchasing them and - and ones that would want to, you know that are more expanding into the cloud environment in their own worlds, supporting cloud environments in their own world.

Q. So, the conversation wasn't so much about protecting CBA, but rather speculation as to who might be a good fit for ServiceMesh.

A. Correct.

…

Q. How did the conversation develop.

A. Nothing more around that, but that - that there was those options.

Q. Who introduced the topic of compensation?

A. Michael Harte.

Q. How did he introduce it?

A. Just that when you go to the States, you need to sit with Eric Pulier and discuss compensation for all that we have done for the organisation and that's when he drew the chart for me.

Q. This was something that took you by surprise, was it?

A. Yeah, the whole drawing the chart and all that, yes.

Q. Why did it take you by surprise?

A. Only because, you know, he was being more direct about it., for, you know for me to talk to Eric Pulier and I've never done something like that, so I was sort of taken aback.

Q. You said, I think, that the compensation was to be for "us".

A. Yeah.

Q. Is that the word that he used?

A. Correct.

Q. Did he use your name specifically? Did he say that you should be compensated, Keith Hunter?

A. We didn't really get into - I can't remember directly, but when he said, "us", I mean, it was always thought of that there was a few people at CBA that should get something.

Q. I'm asking specifically about what Mr Harte said.

A. And, you know, I cannot remember if we discussed names or not.

Q. When he drew the diagram, what did he say to you?

A. He just said that this is an example that, you know, if depending on what ServiceMesh provide - provides and how much help we give them - we have given them to - with certain sales prices, the compensation for us should go up also.

Q. At the time that this was discussed, would it be right to say that Mr Harte was engaging in hypotheticals by saying if the sale is 100 million, this must compensation should flow; if it's 200, that much compensation should flow.

A. Correct.

Q. In other words, he wasn't operating on a specific sale figure at that time, correct?

A. Correct. Correct.

Q. That's because I suggest the sale of ServiceMesh to CSC had not yet been publicised.

A. Correct

…

Q. You told us beforehand that he said to take the graph to Mr Pulier when he went to the United States. Is that right?

A. Correct.

Q. Was it already clear that you would be going to the United States before this meeting you had with Mr Harte?

A. Yes.

Q. Did Mr Harte know of those plans, as far as you're aware.

A. He always knew when I would be travelling, yes, sir.

Q. When was it after this meeting that you travelled to the United States?

A. A short time period after that. I cannot remember the dates.

Q. You said in your evidence in chief, you spoke to Mr Waldron about the graph. Is that correct?

A. Yes. Yes, sir.

Q. That was before you travelled to the United States, you say?

A. Yes.

Q. You showed him the documents or the diagram, correct?

A. Yes, sir.

Q. What did you say to him about the diagram?

A. Just that Michael had drawn it and he wanted me to have a conversation with Eric Pulier.

Q. But what did you tell Mr Waldron the diagram meant?

A. I told him exactly what I just said, it was, you know, sale price versus compensation.

Q. But did you say that you had spoken to Mr Harte, firstly?

A. Yes.

Q. Did you say that Mr Harte had drawn the diagram?

A. Yes.

Q. Did you say that Mr Harte had told you to speak to Mr Pulier?

A. Yes.

Q. Did you say to Mr Waldron that this represented compensation to us?

A. Yes.

Q. Did you use the word "us", or did you say something different?

A. I'm not positive I said but "us" when in that per that conversation, always referred to Jon Waldron, Keith Hunter, Michael Harte.

56. He gave evidence of his conversation with Mr Pulier as follows:-

Q. But why do you say that you infer that it was those three people that was meant by the word "us".

A. Because we had always we had a few conversations around it, Jon Waldron, myself and then, you know, Michael and myself.

Q. That was based on conversations, you say, that were had with Mr Pulier. Is that the case?

A. Correct. Correct.

Q. What did Mr Pulier say to you that led you to have these discussions and infer that "us" meant you, Waldron and Harte?

A. He always - it was very light hearted. He always said that, "we'll take care of you." You know, "you, Jon and Michael", that type of thing.

Q. You suggest that he said specifically, "I'll take care of you, Jon Waldron" or "I'll take care of you, Keith Hunter" or "I'll take care of you, Michael Harte". Is that the case?

A. He said, you know, "I'll take care of you guys and, you know, yourself, John Waldron and Michael Harte", and he also mentioned a gentleman by the name of Hans Gyllstrom.

57. Mr Hunter was cross-examined about his evidence concerning the meeting that took place with Mr Pulier at his office in Santa Monica in which he had raised the diagram drawn by Mr Harte with Mr Pulier. He was taken to evidence he gave in the committal proceedings in which he admitted he accepted a bribe from Pulier to direct work towards SMI. He had given evidence to the effect that the first conversation that he had directly with Pulier was around the time of the signing of the McAfee contract with SMI. That took place in December 2013.

58. Mr Hunter had also given evidence in those proceedings that the conversation with Mr Harte took place three weeks before that. He gave evidence that it was “somewhere around that time frame” which he clarified as “November/ December timeframe”.

59. Mr Hunter agreed that he had given evidence that he had a recollection of the conversations however that his timing could be off. In his first statement to police signed on 31 March 2016 Mr Hunter told police he had a recollection of the conversation with Mr Harte and his office at Darling Harbour in 2013 “around the time of the acquisition”. That acquisition had taken place in October, and it had been announced at the end of October.

60. Mr Hunter was then taken to evidence that he had travelled to the United States in December 2012 with Mr Waldron and had met with a number of companies including Dell and EMC. Exhibit 14 was an email from Mr Waldron relating to their travel to the USA.

61. Mr Hunter gave evidence that had no memory of exactly when his meeting with Mr Harte took place. At the time he raised the issue of compensation with Mr Pulier he gave evidence that Pulier was talking about either selling SMI or taking it public.

62. He was challenged about that evidence as follows:-

Q. And can I suggest to you that those conversations took place at the end of 2012 or the start of 2013; do you agree with that?

A. Probably some of those comments happened then, yes.

Q. Well, can I suggest you gave this evidence at the committal hearing, page 35, line 31.

Q. Again, you told us beforehand, did you not, that the conversations with Mr Pulier about being taken care of took place at the end of 2012 or the start of 2013; correct?

A. Correct.

Q. You told us that the conversations you had to use your expression amongst yourselves, they took place at the end of 2013; agreed?

A. Correct.

Q. They took place approximate in time to the closing of the McAfee deal?

A. Correct.

Q. So can we agree, can we not, that there was about a year between the being taken care of conversations and the conversations amongst yourselves?

A. Correct."

And do you remember giving that evidence?

A. Yes.

Q. Was that evidence truthful?

A. Yes.

63. Mr Hunter gave further evidence that he felt uncomfortable raising the diagram with Mr Pulier and told him that he felt uncomfortable “but Michael asked me to discuss it”.

64. Mr Hunter was then shown the diagram Mr Harte had drawn and gave the following evidence:-

Q. When you handed the document to Mr Pulier, did you say anything?

A. I told I explained what it what it was reflecting, you know, based on the sale price going up by, you know, hundreds of millions across the bottom and applicable - Mike's idea - Michael's idea about applicable compensation. He looked at it and he talked he responded that he would take it under consideration and let us know.

Q. You certainly didn't discuss percentages or money values beyond your explaining to him what the graph meant.

A. Correct.

Q. It's certainly not the case either, is it, that Mr Pulier came back with a counter proposal, is it?

A. No.

Q. He just

A. Not until after the sale when he informed of the amounts.

Q. At the time that you met Mr Pulier though, there was no confirmed acquisition of ServiceMesh known to you. Is that not right?

A. That is correct.

65. Mr Hunter was cross-examined about inconsistencies between his evidence and the proffer statement made to the US authorities including the FBI.

66. The proffer document had included, “Harte explains that CBA could help SMI generate additional revenue that would increase the amount of the earnout incentive SMI received from CSC”. It was put to Mr Hunter that was incorrect. He answered by stating:-

A. By earnout, I guess I was referring to the sale price. I apologise.

67. He repeated his evidence that in the conversation with Mr Harte, it was all about the sale price. He had given evidence at the committal proceedings that the potential rewards to him and others was directly proportionate to the sale price. He gave the following evidence:-

Q. And I suggest that Mr Harte did not say to you that you ought to increase revenue by sending further contracts to the CBA; do you agree with that?

A. He didn't say anything like that, no, at this you know, we didn't talk to that degree on it.

Q. Was that your assumption as to what he meant?

A. Not necessarily.

Q. Well, what did you talk about in terms of increasing the value of ServiceMesh? That is, you and Mr Harte

A. That - that - the sale price of ServiceMesh was you know, that do everything we need to do with them if you know, any work we're going to do with them, let's do it so that it will help their revenue base.

Q. So Mr Harte said to increase their revenue base; is that right?

A. No, to help them increase their revenue base but to do you know, I mean, any work that we needed to do, you know, we should move forward with it.

68. The proffer statement read “Harte explained to Hunter that Pulier had devised a formula to pay Hunter and Harte for assisting SMI to achieve the earnout incentive from CSC”. Mr Hunter agreed that statement was incorrect and no formula was ever discussed between him and Mr Pulier when they met in Santa Monica. He gave evidence that it was not until well into 2014 that a formula was mentioned by Eric Pulier and Jon Waldron in different conversations. It was in that conversation that he was led to conclude that he would be entitled to $750,000. Where the proffer said there was a conversation about SMI generating additional revenue “during the meeting” that was incorrect.

69. Mr Hunter was cross-examined about his statement to police signed on 31 March 2016. In [18] of that statement, he referred to the meeting he had with Mr Pulier when he showed the diagram drawn by Mr Harte. His statement read, “We were in multiple conversations about the CSC deal”. He gave the following evidence:-

Q. So do we infer from that that you knew that ServiceMesh was going to be purchased by CSC at the time that you spoke to Mr Pulier?

A. I must have. Yes, sir.

Q. Did you also know that CSC was going to purchase ServiceMesh when you had the meeting with Mr Harte?

A. I would have had to because that was the same timeframe.

Q. But you told us yesterday, did you not, that when you spoke to Mr Harte, CSC wasn't even mentioned when you were considering the possible suitors for ServiceMesh?

A. And again, when these conversations happened and all that, it was very hard for me to remember dates and timings and all of it since it was so long ago. You know, I would all I can assume that this one is correct but I'm assuming so

Q. You don't know whether your evidence yesterday is correct or whether your statement is correct? Is that the position?

A. Compared to this one, I don't know exactly at this point.

Q. Just to be clear, I'm not asking you about dates, I'm asking you about contents of the conversation. Are you now saying you don't know whether CSC was discussed with Mr Pulier or not?

A. Exactly.

Q. And are you saying you don't know whether CSC was discussed with Mr Harte on the occasion when you say he drew the diagram?

A. Correct.

70. It was put to Mr Hunter that at the time of his conversation with Pulier about the diagram, Pulier told him about the earnout provision. Mr Hunter gave evidence that he did not recall whether it was at that meeting but agreed that it was consistent with his earlier statement i.e., Pulier told him about the earnout provision in the same meeting.

71. Mr Hunter agreed that in order for the CBA to implement its plan of bringing security software into the cloud environment, the involvement of SMI was necessary. He also agreed that was one of the driving factors for using SMI in the provision of the licenses for the McAfee software. He agreed that in his deposition he had given evidence that McAfee had indicated it wanted to close out the deal before the end of the fiscal year. He also agreed that it was consistent with commercial practice in 2013 for companies to be incentivised to conclude contracts prior to the end of their financial years and that by doing so a benefit to the CBA could be realised. It was put to Mr Hunter that the CBA received a $1 million discount on the McAfee contract however he could not recall that. He had given evidence in his deposition that it was a good deal for the CBA, with which he agreed.

72. Mr Hunter gave evidence that Mr Harte had been putting pressure on him to implement Pivotal as soon as possible. It was put to him that the pressure started early in 2013 however Mr Hunter could not recall the timeframe. He recalled giving evidence previously that Mr Harte’s view of Pivotal had been validated as Pivotal had become a transformative product and was now widely accepted as a market leader worth billions of dollars.

73. Mr Hunter agreed that he had previously given evidence that both Mr Harte and Mr Waldron wanted to integrate Pivotal’s PaaS technology into the Agility Platform.

74. Mr Hunter gave the following evidence about Mr Waldron working with Mr Pulier:-

Q. Mr Hunter, you said I suggest in the deposition, he, that is Mr Waldron, was putting time into working, talking to Mr Pulier. Why did you say that?

A. Mr Waldron told-

Q. I'm sorry?

A. Mr Waldron and I had conversation on it. You know, we talked about it. He told me.

Q. You also said that he was talking to "Pulier people", was the expression recorded at least in the transcript. Do you know what you meant by "Pulier people"?

A. No, just in general.

Q. When you say, "just in general", you're talking about people other than Mr Pulier.

A. Correct.

Q. How did you become aware that Mr Waldron was talking to people other than Mr Pulier?

A. Again, Mr Waldron, you know, told me.

Q. What did he tell you about the amount of time he was spending on this type of activity?

A. I mean, he'd he'd be in contact with them, you know, from what I was aware, you know, a couple of times a week, maybe.

75. Mr Hunter agreed that he had given evidence in his deposition in relation to the payments made by ACE Inc., to the effect that Mr Pulier wanted to move all monies outside of ACE and make the payments that were necessary due to the fact that there were tax-related issues. That was a matter he actually discussed with Mr Waldron.

76. Mr Hunter agreed that Mr Harte left CBA around mid-year 2014 and that he looked for other employment opportunities including potentially working for CSC. Mr Hunter agreed that he had discussed Mr Pulier's not-for-profit ventures with him and that he had expressed interest in what ACE Inc. was doing. He gave the following evidence:-

“Q. When you met Mr Pulier in April 24 to discuss these other ventures of his, I suggest you didn't ask him for money that you thought that was owed to you as a result of the sale of ServiceMesh, did you?

A. Pardon me? No, no, that was too late.”

77. Exhibit 20 was an email from Brad Twynham to Mr Hunter dated 2 April 2014 which contained a reference to the discussion Mr Hunter had with Pulier about employment with CSC.

78. Exhibit 21 was an email chain between Messrs Hunter, Twynham and Pulier dated 12 April 2014 in which he advised Pulier that they could not work anything out. He agreed that was because he wasn't happy with the possible salary offered to him. He was then asked:-

Q. Now, can I suggest to you that when you spoke to Mr Waldron about being unhappy about the figure $750,000, I suggest that you were, in fact, talking about the possible income you might make from working at CSC?

A. No

Q. Isn't that the case?

A. that was not - no, sir.

79. The defence case was then put to Mr Hunter as follows:-

Q. I suggest that when you say that Mr Waldron was involved in conversations that either he, you and/or Mr Harte would receive effectively bribes for showing favour to ServiceMesh, that that is false. Do you agree or disagree.

A. No. I disagree.

Q. I suggest to you that it is also false when you say that Mr Waldron was involved in creating what are effectively sham records to explain payments that you say were received as bribes. That's false, isn't it?

A. I disagree.

80. In re-examination, Mr Hunter clarified his evidence concerning Mr Waldron’s contact with Pulier in 2014 as follows:-

Q. It seems to be about in 2014 Mr Waldron's contact with Mr Pulier and his people, and you said that you were aware, through conversations with Mr Waldron, that he was talking with Mr Pulier and his people a couple of times a week. Do you remember saying that?

A. I do.

Q. Do you have any recollection about what it was that Mr Waldron was talking to Mr Pulier and his people about?

A. I do not.

Q. You said that you'd never done any work for Ace that supported the payments that were made to you. Do you remember giving that evidence in chief?

A. Yes, I apologise. I didn't understand we were talking about Ace, sir.

Q. Did you ever receive any information from either Mr Waldron or anybody else that he was doing work for Ace?

A. Only that they were talking about different projects and going forward, sir.

Q. You were aware that, in addition to payments you received, Mr Waldron also received substantial transfers from the company, Ace?

A. I do.

Q. At any time was it ever communicated to you by Mr Waldron or anybody else that those payments were for work done or to be done for Ace?

A. No, sir.

Evidence of Christopher Kelada

81. Mr Kelada first commenced employment with the CBA in around 2008 and is currently in an Executive Management role as Head of Cloud Business Office. When he started at the CBA Michael Harte was the CIO of the CBA and he described him as "an evangelist for cloud technology very early". Mr Kelada became aware of SMI around 2009/2010 and was introduced by Mr Harte to Eric Pulier and Frank Martinez from SMI.

82. From around 2010 Mr Kelada worked under the supervision of the accused who was leading a team driving the cloud strategy for the CBA. SMI had a product called Agility Platform and the CBA was working very closely with SMI on evaluating this product and getting it into the bank’s environment in a “proof-of-concept” type of capacity. This was a testing phase before a formal agreement was entered into for the purchase of the product.

83. Mr Kelada described Agility Platform as a tool that allowed automation and self-service to allow the bank staff to deploy technology into cloud environments. It was a software program that allowed the CBA to take advantage of third-party hardware.

84. Mr Kelada gave evidence that in 2012 the accused became General Manager of IT engineering and Mr Kelada's role in that team was Executive Manager of Technology Platforms, managing a portfolio of IT services relating to CBA’s use of cloud technology.

85. Agility Platform was the first piece of software purchased by the CBA from SMI. It was the principal way in which the CBA engaged in the use of cloud technology.

86. Mr Kelada gave evidence that the McAfee deal and TDs 19, 20 and 21 were outside his area of responsibility being within the security domain. The products sold by way of TD 21 known as Cloud Secure was never used by CBA.

87. Mr Kelada gave evidence about the Pivotal deal involving TDs 17 and 22-29. He drew a diagram explaining the products relating to the cloud infrastructure which became Exhibit M. He gave evidence that he became concerned about each of the products subject of those TDs and that there were limitations in the purchase of migrating the software in each product as at 29 January 2014. He gave evidence that the bank had not made decisions to actually use or deploy the products and it was too early to be making a decision to purchase them. Further, it would have been an option to conduct a proof-of-concept in relation to each software product.

88. Mr Kelada gave evidence that there was no utility to the CBA in purchasing the products at that time. Some of the software related to applications which the CBA had not entered into licensing agreements for and did not thereafter, therefore the products were never adopted for use by the CBA.

89. Mr Kelada gave evidence that he had been asked by the accused to review the TDs before the contract was entered into by the CBA. He gave evidence that he expressed to the accused his concern about purchasing the products given that they were yet to make decisions around deploying the technologies in the bank. He stated, “it seemed a bit too early to be doing so”. Those concerns had been expressed to the accused face to face and the accused had asked him to “think about whether there was value in these types of capabilities being added to the products from an industry perspective, so not only would they be good for the bank, but they would be good for a cloud management tool generally”.

90. Mr Kelada gave evidence that he accepted the accused’s explanation and cooperated, but it did not change his view about the products. On 23 December 2014 he sent an email to Tom Pennington and Nick Giles (Exhibit E, Vol. 5, pg.1853) in which he recommended each of the products subject of the TDs 17, 22-29 not be renewed. He gave evidence that no use had been made of each of the products subject to those TDs and none of the products had ever been put through a proof-of-concept evaluation. At no time up until 23 December 2014 had he had any conversations with the accused about these products.

91. In cross-examination, Mr Kelada denied that he was involved in concluding contracts with ServiceMesh but he was involved in contract reviews. This was mostly the technical focus. He agreed that the engagement with SMI seemed to be less structured compared to other suppliers to CBA.

92. Mr Kelada was questioned about the transaction document which related to adapters and blueprints for the SMI Agility Platform. The TDs relating to security software were not within his portfolio. His understanding of TDs 19 - 21 was that they enabled CBA to purchase McAfee software licenses at a lower price and this was part of a cost saving initiative on the part of the CBA. At that time there was a big focus on productivity and all areas of the bank targeted to save and reduce costs.

93. Mr Kelada gave evidence that he only heard of the product Cloud Secure “after the fact” which meant after the contract with SMI in relation to adapters and blueprints had been concluded. He gave the following evidence:-

Q. You knew at the time, that is back in 2013 I suggest, that the bank was using agility platform, was it not?

A. Yes, it was.

Q. I suggest you also knew that the bank was using McAfee; correct?

A. Yes.

Q. Was there a management tool called ePO?

A. Yes. EPO is part of the McAfee product suite, I believe.

Q. Can I suggest that the Cloud Secure permitted the agility platform solutions to integrate with McAfee's management tool, ePO?

A. I believe that was the intention, yes.

Q. I think ultimately it's the case, is it, that the Cloud Secure software was not deployed by the bank; is that right?

A. That's correct.

Q. Was it tested by you or your team?

A. I don't believe so, no.

Q. Is the reason for that that there had been a custom script which had been created by the bank which permitted management of the McAfee software?

A. That's right. So we had already integrated that capability in our deployment because we need to deploy McAfee to all of the - all of the virtual service. So we had to solve that problem and we did, and then later on obviously this feature was available in the product.

94. Mr Kelada agreed that when he was working as Executive Manager of Technology Platforms, his team was a busy with a lot of parallel projects. He agreed that Cloud Secure was not high on his list of priorities. He agreed that it was not the case that the software would not function, but he was busy doing other things of the time.

95. Mr Kelada gave further evidence that the CBA was SMI's largest customer and as a result of their relationship they were able to provide SMI with feedback around features of the applications which would be suitable for the CBA and other customers similar to it. He agreed that it was in the bank's interest for SMI to improve its products and to acquire additional customers which would ultimately lead to a higher quality and maturity of their solutions.

96. Mr Kelada agreed that in order for there to be integration between Agility Platform and PaaS, it was necessary for further programs to be written to provide for that functionality. Such programs included “adapters and blueprints”. He agreed that blueprints provided for automation of repetitive processes and adapters provided for an interface between two sets of technology. Integration between Agility and PaaS did not exist in the products in 2013. He agreed that was the type of functionality described in the TDs 17 and 22-29.

97. Mr Kelada gave evidence that he did not view the adapters and or blueprints which underlay the transaction documents as unnecessary distractions in early 2014. That was because they were part of the bank's direction in moving towards cloud computing.

98. The witness gave evidence that Mr Waldron was championing the Agility Platform in 2013 and 2014 and at the beginning of 2014 he was attempting to accelerate the integration of Cloud Foundry at the bank. He agreed that once Mr Waldron left the bank support for the integration of Cloud Foundry effectively evaporated. He agreed his earlier evidence that when he had discussed the SMI PaaS TDs with the accused, he didn't find the products listed in the TDs to be too unusual given the prior history of the relationship between SMI and CBA. He had accepted the accused’s explanation to “think about the bigger picture.”

99. Exhibit 25 was an email trail beginning with an email from Zahid Arain to Helen Sutcliffe dated 22 May 2014. It referred to the request to accelerate the development of new features and capabilities which Mr Kelada understood were provided for in the TDs subject of these proceedings. He gave the following evidence:

Q. And that those new features and capabilities would support the bank's continued evolution of the platform; is that not right?

A. Potentially.

Q. And by platform you mean the Agility Platform; is that not right?

A. It was - yes, this was related to the Agility Platform.

Q. Those features and capabilities would support the evolution and enablement of PaaS; correct?

A. Yes.

Q. And by "related integration", you're talking about integrating PaaS with the Agility Platform, I suggest?

A. Yes.

100. Exhibit 26 was an email dated 23 May 2011 which included a diagram headed “X86 Domain Architecture”. Mr Kelada agreed that the diagram suggested an overlap between the Agility Platform and other functions including infrastructure management, security integration and security, as well as other software functions.

101. Exhibit 27 was an email from Jon Waldron to Frank Martinez and others dated 8 December 2014. Mr Kelada agreed that at that time Agility Platform was the focal point of the bank cloud strategy. He further agreed that it was anticipated that its functionality would be enhanced with additional components.

102. Mr Kelada was cross-examined about numerous emails concerning the CBA’s acquisition of products relating to cloud technology including from SMI. Exhibit 40 was an email from Mr Kelada to Mr Waldron dated 11 November 2014 reporting to Mr Waldron as to the impact of the cost of the SMI software. Mr Kelada gave evidence confirming that the benefits within the MSA between SMI and CBA following acquisition of SMI by CSC was that the fees payable by the bank would be reduced resulting in a cost reduction in SMI fees to the bank of approximately $1.5 million.

103. In re-examination Mr Kelada gave evidence that he was not aware of any situations where products were purchased without the preparation of a business plan by the CBA. He gave the following evidence concerning the lack of business plans for the software products contained in TDs 17, 22-29:-

Q. As at January 2014, had any business plans been prepared in relation to the purchase of any of the Pivotal Cloud Foundry, OpenShift, or Azure PaaS products?

A. Not to my recollection. We were just starting conversations with some of the developer community about - about it, but I don't - I'm not aware of a business case that was developed.

Q. Would you expect that a business case would have had to be developed in relation to any one of those products before those products were purchased by the bank?

A. That's just the - the normal process - procurement process, generally.

Q. Is it the case that no business plans were produced in relation to any of the software products contained in TD17, 22-29?

A. Not to my knowledge.

104. As to the contracts being premature Mr Kelada gave the following evidence:-

Q. So you said in evidence in chief that you raised with Mr Waldron that the purchase of the integrating software from ServiceMesh in January 2014 was premature - I think it was in December, actually, you made those comments, 9 December? Do you remember that evidence you gave in chief?

A. Yes.

Q. Having had your attention brought to the various emails that you were cross examined about, do you agree with the opinion you expressed to Mr Waldron at that time as to the prematurity of the purchase of those items at that point in time?

A. Yes.

Q. And why's that?

A. Because it's one thing to validate that the technology is compatible with your infrastructure, but there is more work required to engage with the actual user community to see if it's actually of value to them as users, and whether each of these technologies, these PaaS platforms, would actually deliver the benefits that they proposed to deliver on, namely, speeding up the application development process for the user community.

Q. And if you had come to the conclusion through your POC process that one or other, or all of those products, weren't suitable for CBA implementation, how would that have impacted on the utility of the integration products that were purchased from ServiceMesh?

A. Well, if we weren't using the underlying PaaS technologies, then we wouldn't need the integration.

Q. And the process by which you were engaging in proof of concept in relation to the PaaS technologies; did that involve entering into purchase agreements with any of these companies at that point in time?

A. Sorry, can you say that again?

Q. Did the Commonwealth Bank enter into contracts and pay monies to Pivotal, or Microsoft, or Red Hat whilst you were engaging in the proof of concept process for their PaaS products?

A. No, not to my recollection.

105. Mr Kelada confirmed that once Mr Waldron left the CBA’s employment interest in the three PaaS products ceased and the projects did not proceed. He gave the following evidence:-

Q. To what extent was that as a consequence of Mr Waldron leaving the organisation?

A. It's hard to say. I think if there was you know, if we were, perhaps, further along, if we had - the developer community had been convinced of the merits of these technologies and had embraced it, then I think someone leaving the organisation would not really impact those plans; it would continue to execute, but we hadn't progressed to that point at that time.

Evidence of Mr David Bradbury

106. Mr Bradbury gave evidence that he commenced with CBA in 2012 as Executive Manager of the Information Security Services team, reporting to Benjamin Heyes. He was familiar with the security products provided to the CBA by McAfee and identified a McAfee proposal entitled “Take 4 Jan 2013”.

107. Mr Bradbury gave evidence of an approach by Alexandra Drury at the end of 2012 on behalf of McAfee to provide security software to the CBA by way of an Enterprise License Agreement (“ELA”). The proposal which was to cost the CBA $2.4 million was shelved in April 2013.

108. Mr Bradbury gave evidence that Mr Waldron had raised the issue about an ELA for McAfee security products in October 2013. It was the accused who expressed a desire for SMI to provide McAfee product directly to the CBA as third-party reseller. Up until this time McAfee security software had been supplied to the CBA by Hewlett-Packard (“HP”).

109. Mr Bradbury gave evidence that he had calculated how much the CBA was spending on McAfee products at the time. He gave evidence of this costing the CBA approximately $2.2 million per annum and he gave evidence that if the bank was to replace two other vendors with McAfee that would cost bank just over $3 million a year.

110. In relation to an email the accused sent on 17 December 2013 providing a contract price of $2.9 million per annum for the purchase of McAfee software through SMI Mr Bradbury gave evidence that this was “moving very fast for such a large deal and an enterprise contract with the bank. Similar contracts that I can recall negotiating with the vendors were taking 18 months to 2 years to negotiate, and we were negotiating this in days.”

111. In an email to Tom Pennington on 17 June 2014 he raised a problem with the McAfee deal as follows:-

“The problem is, is that, given that we didn't I did not have any visibility of the deal that had been negotiated, we had mistakenly agreed to sign up to having two onsite… resources to support us for a small period of time, which was not required.”

112. In cross-examination Mr Bradbury was asked about the proposed transaction with SMI as follows:-

Q. You ultimately became aware of the possibility of ServiceMesh providing McAfee software as a third-party supplier; did you not?

A. Yes. I heard about this sometime, I think, in December of that year.

Q. Your team, therefore, became involved in assessing at least parts of the proposed transaction with ServiceMesh, did it not?

A. I wouldn't say we looked at any piece connected to ServiceMesh, but we were involved in discussions with McAfee to make sure the list the order form was filled out correctly and the right software was included.

Q. Can I suggest that, as a result of those discussions, there was a variance between what had been previously offered by McAfee and what you, at the end of 2013, thought was necessary for you team; isn't that right?

A. That's my understanding, yeah.

Q. Can I suggest to you that a decision was made that Enterprise Mobility Manager was something that would not be required by the bank?

A. I struggle to recall.

Q. Can I suggest, however, that Enterprise Mobility Manager was something related to mobile telephones and the like and the security on them?

A. I fail to recall a discuss about that.

Q. I can I suggest to you that added to the list of software desired by your team was change control for servers; does that ring a bell?

A. I recall additional security software requires for servers, so that - that may be item.

Q. Can I suggest that the selection involved including something called MFE Real Time; does that ring a bell?

A. It's an enhancement to their antivirus offering, so yes.

113. Mr Bradbury gave the following evidence about his knowledge of what HP was charging the CBA for the provision of McAfee:-

Q. When was the first point in time when, to your knowledge, someone from the CBA sought transparency from HP as to what HP was charging the CBA for the provision of McAfee software?

A. As far as I'm aware, that only began when we started to renegotiate the Windows contract for the desktop because, prior to that moment, it was all locked up in contacts, and to unlock those contracts would be a nonstarter. So I'm not aware of any discussions. The opportunity to begin those discussions started with the movement from one Windows version to the next.

Q. Can you put an approximate date on when those negotiations began?

A. November, October, 2013.

Q. Is it right to say that those discussions occurred contemporaneously with your discussions with Mr Waldron about the possibilities of an ELA raised during the ODPIF project?

A. Yes.

114. The following evidence was given by Mr Bradbury:-

Q. In relation to the need for haste in 2013 to engage in this ELA through ServiceMesh, was there any other reason apart from the explanation provided by Ms Drury as to why that needed to be done by the end of December 2013? As in, entering into an ELA between CBA?

A. My understanding was, it was also the end of financial year for McAfee, which, for all software companies, they do the majority of their business in any given year in the final month of the financial year, and so there would have been large targets on Ms Drury's side of the fence for her to hit, and therefore, there was pressure on her side to close out a deal to make their numbers for the year."

115. In re-examination, Mr Bradbury gave evidence that he had never known what the SMI Cloud Secure products subject of TDs 20 and 21 were.

116. Mr Bradbury was asked about Mr Nicholson’s role as part of the procurement team. He gave the following evidence:-

Q. From your experience, given the procurement was for products and services in the sum of $10 million, was that something that seemed unusual at the time?

A. Yes.

Q. Why was that?

A. Typically, in particularly in multimillion dollar transactions, business leaders such as myself aren't allowed to negotiate those prices. Those prices are negotiated by the procurement team, because that's what their specialist specialisation is, as far as their - their job role is concerned in the bank. They are the ones who negotiate deals. They're the ones who negotiate prices, so to see them come in at such a late stage was different.

Q. Are you aware as to any risk factors that might present where a unit such as the procurement team wasn't involved in such transactions?

A. The risk of it is inherent in not having the procurement deal negotiate your prices is that you may not get the best deal that's going around.

117. Mr Bradbury gave evidence about the speed of the deal as follows:-

Q. You said before about how, in your experience, this deal happened at a very quick rate. Do you remember giving that evidence yesterday?

A. I do, yes.

Q. This issue about resolving who of the entitles that would be included in the deal being sounded out on 29 November 2013, in circumstances where final contracts are signed on 23 December 2013, is that something which strikes you as unusual or different to your normal experience in relation to such products?

A. The bank has a history of taking its times on everything. So to see us rush through anything is raises my eyebrow, and it's different, and it's normal for the bank.

Q. I'm certainly asking just about, at this time, this aspect of the complexity of the negotiation. What efforts would you think would need to go into determining what entity should be included in the agreement that's reached with McAfee?

A. This would be a key element of where procurement and others would lean into the deal to make sure that our subsidiaries in other locations are appropriately being accommodated. So this is what I would expect to do be a normal part of the procurement process.

Evidence of Mr Marcus Nicholson

118. Mr Nicholson commenced employment with the CBA in 2006 as Manager of Software Licensing. In December 2013 he was the Manager of Software Services reporting to Mr Tom Richardson, the General Manager of Partner Management at CBA. He gave evidence that Partner Management looked after all commercial matters to do with the bank's software and hardware.

119. Mr Nicholson's area of specialty was software licensing and he was responsible for the end-to-end management software licensing and services associated with it.

120. Mr Nicholson gave evidence that he was not involved in the McAfee proposal which was shelved in March 2013. On 2 December 2013 Mr Richardson asked him to review the MSA for the McAfee deal. He contacted the accused to request the most recent copy of the MSA. He gave evidence that once he became aware of what was proposed to be purchased, he had a number of concerns. First, the price jumped “astronomically” from the original offer, there had been no legal review done at all on the contracts and there had been no risk review agreement. Further the MSA between the CBA and SMI did not contemplate SMI acting as a third-party reseller and the CBA had never been involved in any circumstances in which SMI had acted as a third-party reseller of software in the past.

121. Mr Nicholson gave evidence that he was interested in the commerciality of the agreement and the legality of it. He gave evidence that a procurement agreement in the order of $10 million would put the CBA in a strong negotiating position with a software vendor such as McAfee.

122. Mr Nicholson gave evidence that he had expressed his concerns and that on 12 December 2013 he had sent at email (Exhibit E, pg.1426) stating that his concerns had not been addressed. On 16 December 2013 he had a meeting with Brad Twynham in which a difficulty arose concerning areas of liability which Mr Nicholson indicated was a “showstopper.” This led Mr Twynham to send an email headed “Impasse” to Mr Waldron (Exhibit E, pg.1519).

123. Mr Nicholson gave evidence that the issue was of significance because “the software in question was designed to protect CBA from virus attack on all of its desktops. If it didn't do its job, it left CBA liable for penetration of the desktop and any subsequent damages that arose from that – “breaches of privacy, et cetera so it was a very big deal.”

124. Mr Nicholson gave evidence that he reached out to Miriam Lane, an Executive in the risk team at CBA on 16 December 2013 and she made it clear that a transaction of that size needed to have a risk review.

125. The witness gave evidence about an email from the accused dated 17 December 2013 in which he stated “commercial sense has already been verified…Keith and I want this sorted ASAP within the next 48 hours. Don't worry about steps that have already been done.”

126. Mr Nicholson gave evidence that the problems he identified could not be sorted out in the next 48 hours.

127. Mr Nicholson gave evidence that he never received sufficient information throughout the course of the process to satisfy himself in relation to the commercial viability of what was being proposed. He had raised a number of issues with Mr Richardson including pricing, lock-in and legal. He was also concerned about the indemnity clause and removal of HP costs. There also did not appear to have been a risk assessment carried out. Mr Richardson identified these issues in an email to the accused on 17 December 2013 at 6:47pm.

128. Mr Nicholson gave evidence that this was completely different from how deals had been concluded the past. He did not believe that Mr Waldron was focused on trying to get the best outcome for CBA, “just a fast outcome”.

129. On 18 December 2013 Mr Nicholson sent an email to Tom Richardson with his concerns. Under the heading “Deal Construct” those concerns were, in narrative form, as follows:-

"The total value of this deal is $10.5 million over three years. Once this agreement is signed, there is no provision for the bank to terminate so we are locked into this payment. Whilst the majority of this deal is for McAfee software, it is being purchased through ServiceMesh at markup rates that I've been advised sit at 0, 5% and 10% depending on the products. I have, however, don't have a breakup of these numbers. There is confusion about what we are actually buying. According to the documents, the deal includes McAfee software in a ServiceMesh product called Cloud Secure.”

Jon has advised me, however, that this deal is just for McAfee software. If that is the case, and it's just McAfee software, why are we buying it through ServiceMesh and paying a markup? I've been told that the Cloud Secure product is a new product, which the bank will be the first to roll out. I've also been told that this product will be developed in conjunction with the bank. In an attempt to know more, I've tried to research the Cloud Secure product, and there's nothing on the ServiceMesh website that I could find. I believe the bank should be clear on all these points before signing."

130. In the same email Mr Nicholson noted that the bank was being asked to pay an additional $3.3 million from the previous proposal, a deal that was rejected for being too expensive. Mr Nicholson also stated that he was not happy with the accused’s conduct as follows:-

“•He’s spoken to you regarding me, without checking facts.

•He’s been communicating directly with the vendors, behind our backs, as we try to finalise negotiation, then tries to push past processes.

•The emails he sent mentioning that Keith and he just want it done, could be construed as intimidation.”

131. Mr Nicholson gave evidence that upon review of the McAfee deal he was unable to validate the value of it to confirm if the additional $3.3 million made sense however he never formed the view that the transaction should not proceed at all. Rather he believed that significant changes were needed to happen in the commercial construct for it to proceed.

132. From Sunday 22 December 2013 Mr Nicholson had no more involvement in the review of the purchase proposal having told Mr Richardson that he believed it should not proceed.

133. Mr Nicholson was cross-examined extensively about the steps required for due diligence of the contracts that made up the McAfee deal.

134. Mr Nicholson agreed that the transaction with SMI was causing him “grief”. He gave the following evidence:-

Q. The transaction was causing you grief; is that right?

A. Yes.

Q. Why?

A. It was being asked to be completed in unrealistic timeframes. It was being asked to bypass what I would classify as the normal protocol when you're negotiating a deal. As approaching a deal, I would run through normal ways of doing things. Understanding the facts, understanding the need. We were being asked to push it through in a quick timeframe, when I could see no reason for the quick timeframe. Nothing was presented to me that said, having it done by the end of this year would save the bank money, would be a benefit to the bank, other than just get it done.

…

Q.  But you didn't need to know why it needed to be done immediately, did you?

A.  From a commercial perspective, yes. I needed to understand why it's important to have it done ASAP.  Does the deal disappear if it's not done ASAP?

Q.  But you had been told that it would disappear unless it was concluded by the end of the calendar year, weren't you?

A.  I don't recall either way about that, no.  But I certainly don't recall there also being a, if it's not done by the end of the year the price will go from 7 or 10.3 million, it will go up.

Q.  You were told, were you not, that the deal needed to be concluded before the end of the calendar year.

A.  I was told, internally, it needed to be concluded, yes.

Q.  You knew full well that software companies often provided incentives for deals to be concluded before the end of the calendar ‑ or their, specifically, financial ‑ year; correct?

A.  Correct, but I would not necessarily be aware of those deals as I'm lead negotiator on it.

135. Mr Nicholson agreed that one of the advantages of an MSA is the fact that transactions can occur with greater ease because certain terms and conditions are already agreed upon.

136. In relation to the ServiceMesh MSA, the witness gave the following evidence:-

Q. Mr Waldron says this, according to the email, "There is no MSA to review. This transaction is under the ServiceMesh MSA, which is already done and dusted". Can I ask you some questions about that?

A. Yes.

Q. Do you agree that, ultimately, there was no MSA that needed to be reviewed?

A. I would still review the MSA to make sure I was comfortable with it. I wouldn't take anyone in the business' word that they were comfortable with it. It's my own job to perform my own due diligence, make sure I'm comfortable with it.

Q. He also says this, "This transaction is under the ServiceMesh MSA"; that's ultimately what occurred, isn't it?

A. Yes, it is.

Q. "Which is already done and dusted". Did you understand that to mean that it had already been concluded?

A. Yes.

Findings of fact

785. Having regard to the whole of the evidence I make the following findings of fact:-

1. In 2012 the CBA adopted under its CIO, Michael Harte a policy to transform its computer-based technology systems to a cloud computing system.

2. The accused, as general manager of IT engineering reporting to Keith Hunter was responsible for procuring the software systems to facilitate this transformation. At the relevant time in 2013 he was responsible for a budget of $740 million per annum.

3. SMI had supplied software to CBA since 2009 and had signed an MSA in 2011.

4. The accused and Keith Hunter developed a close working relationship with the principal of SMI Eric Pulier and with Brad Twynham as its sales consultant in Australia.

5. Pursuant to the MSA the CBA purchased and implemented SMI’s Agility Platform software as a cornerstone of its cloud computing system.

6. On 9 September 2013 CSC signed an expression of interest to acquire SMI for US$335 million for 100% equity. The terms provided for no earnout provision.

7. On 16 October 2013 CSC signed an exclusivity letter agreement annexing a term sheet and Salesforce Pipeline which provided for the purchase of SMI for US$291m with an earnout payment of up to US$135 million.

8. On 29 October 2013 CSC entered into an EPA to purchase SMI for US$293 million with an earnout payment based on a multiplier of revenue above US$20 million for the period 1 January 2013 to 31 January 2014.

9. On 31 October 2013 the accused sent a text message to Mr Twynham stating, “We have a proposal on the table already” and on the same day sent an email to Hunter disclosing that an SMI license to supply McAfee software would increase SMI revenue by $7 million, “so here’s 7m for them”.

10. I find that both the accused and Keith Hunter knew at that time about the earnout provision in the CSC EPA and I accept the evidence of Mr Twynham that the accused knew about the earnout provision from late September to early October.

11. On 1 November 2013 Pulier raised the prospect with Mr Harte of Pivotal software being adopted by CBA for use on the Agility Platform.

12. I find the accused played an integral role in the CBA executing the McAfee deal on 22 December 2013 (i.e., TDs 19, 20 and 21), overcoming issues raised by Marcus Nicholson concerning liability issues, risk assessment, and legal assessment and its commercial value, as well as negating HP's interest in continuing to re-sell McAfee security software.

13. Exhibit AL established that on 20 December 2013 the accused sent Twynham a message that read “I also talked to Kyle and agreed scope the Pivotal TD, so we should we able to land that one easily enough.”

14. Twynham replied, “Great…We should put you on the payroll.”

15. The accused responded, “Hopefully, I already am! :)”

16. I find the only rational inference to be drawn from that exchange is that the accused regarded himself as on the “payroll” of SMI and was therefore entitled to some payment.

17. I find that the accused, Hunter and Pulier had discussed compensation for facilitating SMI to meet the earnout clause, probably in September 2013 and certainly after the EPA was executed. The EPA attached the Salesforce Pipeline referring to 5 potential contracts with the CBA none of which materialised. Within two months of the EPA the CBA executed the McAfee deal which produced revenue of over $5 million for SMI to include in the earnout.

18. Within a further month the Pivotal deal (TDs 17, 22 to 29) was executed which raised in excess of $5 million for the purpose of the earnout.

19. Without both deals, SMI would not have surpassed revenue of US$20 million in the timeframe provided and thus would not have been entitled to a payment under clause 3.1 of the EPA. With the revenue from the two deals SMI became entitled to a further payment of over US$98 million.

20. I accept the evidence of Mr Kelada and Mr Marsden that the software products subject of TDs 17 and 20 to 29 were premature, being at proof-of-concept stage, and incapable of utility by the CBA which in respect of at least some of the products held no licenses for their use.

21. The email evidence established that SMI employees manipulated the contracts to satisfy SMI’s need for revenue and the accused facilitated that process by agreeing to split the Pivotal deal from one transaction with the consideration of $1.5 million to nine separate TDs totalling $6.1 million.

22. I find that the accused facilitated the Pivotal deal and both the accused and Hunter agreed to split the deal into nine separate deals to avoid scrutiny and to ensure the deal was finalised within the earnout period i.e. before 31 January 2014.

23. I accept the evidence of Mr Marsden as to the pricing timeline of the products contained in the Pivotal TDs as depicted in Exhibit AY.

24. The Pivotal TDs were subsequently terminated by the CBA in February 2015.

25. I accept the evidence of Mr Hunter that he did discuss compensation for facilitating the two agreements, first with Mr Harte and subsequently with Mr Pulier by providing him with the draft diagram proposed by Mr Harte for his consideration. I find that conversation probably took place during his trip to the USA in December 2013. I also accept Mr Hunter’s evidence that he showed the diagram to the accused prior to that meeting.

26. In so finding, I do not accept the submission made on behalf of the accused that I should reject the evidence of Mr Hunter and that he was motivated to accept the allegations made against him, even if they were unsubstantiated. He accepted and acknowledged his guilt for receiving the payments as bribes because he did no work for either Pulier or ACE. Notwithstanding that his evidence was characterised by the accused as “informer evidence”, he was in fact a co-offender whose evidence was not tainted by the fact of his undertaking to give future assistance. The inconsistencies in his evidence were generally not significantly material and were explicable by the state of his mental health and the effluxion of many years since the events occurred.

27. I also accept Mr Hunter’s evidence that in 2014 he and the accused discussed payment of compensation with Pulier and the accused had told him he would be receiving $750,000.

28. I accept the evidence of Mr Martinez regarding his receipt of monies from Pulier via TA and the schedule of payments agreed between them in Exhibit AF. That schedule included payments to Hunter of $US925K and the accused of US$1.48 million. I accept the evidence of Mr Martinez that the percentages were adjusted by him to “pro-rata, so that it would equal 100%”. That evidence explains the amount payable by Pulier to the accused was recorded as US$1.48 million, and not US$1.5 million as the evidence established, he expected to receive.

29. Whilst the accused undoubtedly had the technological skills to create and modify computer-generated documents there is no evidence that he did so and I accept the evidence of Dr Watt that the metadata demonstrates the documents in Exhibit AAB were created on the dates contained therein.

30. I find that the accused met with Pulier in Santa Monica on 11 April 2014. The only plausible explanation for the communications that followed on 12 April 2014 between the accused and Twynham namely “Keith at 750K…it was more than the formula” and “$$landed. Keith at 750K… He was just hoping Eric would top it up to $1m” is that they discussed payments by Pulier to the accused and Hunter from the proceeds of sale received by Pulier and TA. It also explains the file note in Exhibit Z created by the accused on 21 April 2014 which also informs the purpose for which the accused submitted his first Statement of Work with a schedule consisting of a payment of approximately 1.05m, acknowledging the differences between the payments to himself and Hunter.

31. I find that the sums referred to i.e. “Keith at 750K” did not refer to any proposed employment of Mr Hunter by CSC as propounded by the accused. His evidence that the “formula” related to a proposed remuneration for employment by CSC was without foundation and I reject it.

32. I accept the evidence of Mr Deckelman that the McAfee and Pivotal deals were accepted by CSC following agreement between Pulier and CSC and auditing of the transactions. From the McAfee deal revenue of US$5,022,542 was included in the earnout and from the Pivotal deal US$5,404,084 was included. I find they were not included by mistake on the part of CSC.

33. The evidence established the following chronology of payments received by the accused and Mr Hunter:-

1. 16 May 2014 $99,971.02 received by the accused
   (Count 1)

2. 29 July 2014 $199,908.26 was received by the accused (Count 2)

3. 7 August 2014 $330,000 received by Hunter (Count 8)

4. 8 August 2014 $299,980.40 received by the accused (Count 3)

5. 28 August 2014 $149,990 received by Hunter (Count 9)

6. 24 September 2014 $149,990 received by Hunter (Count 10)

7. 4 November 2014 $300,000 received by accused (ASB a/c) (Count 4)

8. 12 November 2014 $300,000 received by the accused (ASB a/c) (Count 5)

9. 10 December 2014 $350,000 received by the accused (ASB a/c) (Count 6)

10. 16 December 2014 $350,000 received by the accused (ASB a/c) (Count 7)

34. The accused received payments into his CBA Midas account totalling $599,931.68. He received payments into his ASB account of $1,300,000, a total of $1,899,931.68.

35. Mr Hunter received in respect of the above payments $629,980. He also received the sum of $21,881.60 from the first payment of $100,000 made to the accused and therefore received a total of $651,861.16.

36. I find that Exhibit AU established the accused had debts as at 21 December 2013 of $114,427 and as of 15 May 2014, $124,196. He dispersed $80, 875 from the funds received in his first payment on 16 May 2014 to pay down outstanding debt, and $141,500 on 31 July 2014 for the same purpose. On 10 November 2014 he transferred $200,000 from his ASB foreign currency account to another ASB account.

Determination

786. The documents produced by Mr Goldstein in Exhibit N include the following:-

1. A Statement of Work dated 21 July 2014 with the job name “IT as a Service – Transformation to a Cloud Operating Model.” The document set out a contract price of $1,400,000 and the following payment schedule:-

21 July 2014	$200,000
4 August 2014	$300,000
1 September 2014	$300,000
6 October 2014	$300,000
3 November 2014	$300,000

2. The Statement of Work and invoices referred to were on Digisol letterhead. The first two invoices requested remittance of payment to the accused’s account at the CBA, Sydney. The third requested remittance to Keith Hunter’s account at the CBA, Sydney and the fourth invoice requested remittance of payment to the accused’s account at the ASB Bank Limited, Auckland. The fifth invoice dated 1 November 2014 requested remittance of payment to Digisol Services at an account with ASB Bank Auckland.

3. The second Statement of Work on Digisol letterhead was dated 1 December 2014. The job name was “IT as a Service – Digitised Service Catalogue”. It provided for a price for software build and delivery for of $1,050,000 with the following payment schedule:-

1 December 2014	$350,000
15 December 2014	$350,000
29 December 2014	$350,000

4. The two invoices produced were dated 1 December 2014 and 15 December 2014 respectively. Each was in the sum of $350,000 and payment remittance was requested to an account for Digisol Services at the ASB Bank, Auckland.

5. Exhibit N also included the Statement of Work and invoices that Mr Hunter had fabricated. They included two Statements of Work dated 5 May 2014 for “Business Planning & Strategy Consulting”. Both were in the same format and were for the same price, $330,000, but were on different letterhead. A Statement of Work dated 4 June 2014 for “Consulting Services/Data Center Build” was on the letterhead of Keith Hunter and provided a price of $150,000. Another Statement of Work also on the letterhead of Keith Hunter dated 11 July 2014 was also for “Consulting Services/Data Center Build” and was also priced at $150,000.

6. Also included in Exhibit N were two invoices from Mr Hunter dated 22 August 2014 and 16 September 2014 both seeking payment of $150,000.

787. As conceded by the accused, the documents referred to above in Exhibit N cannot be reconciled with the documents sent by the accused for analysis which are contained in both Exhibit AAB and Exhibit 117. The first Statement of Work referred to in Exhibit AAB is dated 23 June 2014 – the job name being “IT as a Service – Transformation to a Cloud Operating Model.”

788. The document has the same summary of work as in the Statement of Work in Exhibit N dated 21 July 2014 with the addition of the following paragraph:-

“On completion it is envisaged that this blueprint, in a real-world pilot, will serve as the workplan guide of a multi-year IT-as-a-Service transformation for Italian telecommunications company Tiscali S.p.A.”

789. The schedule to the Statement of Work provided for a price of $600,000 and payment was required according to the following schedule:-

9 May 2014	$100,000 – Invoiced on 23 June 2014 and paid on 16 May 2014
27 June 2014	$200,000 – Invoiced on 27 June 2014 and paid on 29 July 2014
1 August 2014	$300,000 – Invoiced on 1 August 2014 and paid on 8 August 2014

790. The second Statement of Work in Exhibit AAB was dated 31 October 2014, and was on Digisol letterhead. The job name was “Micropayments on Blockchain” and the total price was $1,650,000.

791. The schedule to the Statement of Work provided for the following schedule:-

31 October 2014	$300,000 – Invoiced on 31 October 2014 and paid on 4 November 2014 into the accused’s ASB account
7 November 2014	$300,000 – Invoiced on 7 November 2014 and paid on 12 November 2014 into the ASB account
21 November 2014	$350,000 – Invoiced on 21 November 2014 and paid on 10 December 2014 into the ASB account
5 December 2014	$350,000 – Invoiced on 5 December 2014 and paid on 16 December 2014 into the ASB account
19 December 2014	$350,000 – Not invoiced

792. It is abundantly clear from the above comparison that Statements of Work and invoices in each Exhibit cannot be reconciled. They relate to differently described work, have different pricing and payment schedules, and are not executed by the contracting parties. The payments received by the accused do however generally follow the two schedules of payment in the Statements of Work in Exhibit AAB except for the first payment of $100,000 made on the 16^th of May 2014 but not invoiced by him until the 23^rd of June 2014. The accused provided no explanation for that anomaly.

793. Exhibit 117 established that the accused was first contacted by Mr Goldstein on 12 May 2014 by email. The emails in that Exhibit established that on 22 June 2014 the accused forwarded the Statement of Work dated 23 June 2014, describing it as “the finalised SoW we agreed for the Tiscali work” and forwarded “the invoice to cover off the initial payment”. This explains the addition of the third paragraph of the summary of work referred to above and the change in the payment previously made on 16 May from $200,000 as initially invoiced, to $100,000.

794. The emails exchanged between Goldstein and the accused between 25 October 2014 and 30 October 2014 shed little light on whether work was actually carried out for Ace. For example, on 25 October 2014 the accused wrote to Goldstein:-

“I have been talking with Eric recently re. ACE. He mentioned he’s looking to disburse the funds from ACE intended for one of the project LiQuid sub-projects (Micropayments) so as to avoid an end of year tax liability. He asked me to reach out to you and coordinate this with you.

Has Eric brought you up to speed here? Are you familiar with all this?

If so, how do you suggest we proceed? I can work on a SoW to cover off the initial phase of the project – ideas which I have been discussing with Eric anyway. So I’ll need to set that up and kick off this project in anger as soon as I can. But it looks like I’ll also need to include advances from ACE to cover off the rest of the project too. How much is ACE needing to disburse at this stage? Eric wasn’t exactly sure – He said you’d know. Thoughts on how we go about this?”

795. In reply Goldstein wrote:-

“Yes, Eric and I have been talking too. He’s brought me up to speed on your conversations. I am fine with however you want to arrange it. But perhaps it makes best sense to do it as four or five similar size wire transfers from now until the end of the year? That way everything stays consistent. Make the total amount for $1.65m please. This would be very helpful. Thank you.”

796. I therefore find that the Statement of Work and invoices in Exhibit AAB do not substantiate that the accused did work for ACE. Rather, I find they were a device to facilitate the payments Pulier intended to make to the accused and Hunter to compensate them for facilitating the earnout. I accept the Crown submission that the documents were fabrications in the sense they were created to justify the payments which were really made as a reward for efforts by the accused and Hunter.

797. Whilst it is clear from the evidence of Ms Sugar that Eric Pulier was motivated to disburse funds from ACE for tax purposes that does not in any way establish that the payments made to the accused and Hunter were for work done or for work to be done. I reject the submission made on behalf of the accused that the evidence left open the very real possibility that Pulier paid the amounts when he did in order to avoid a tax liability and if that was accepted then the accused must be acquitted of Counts 1 to 7 since the payments were not made as a reward to him for facilitating business opportunities for SMI. How Pulier chose to make the payments was a matter for him, and the evidence established that he used the proceeds of the sale of SMI that were divested to TA which were then transferred (except for the first payment of $100,000) to ACE for payment on to the accused and others as listed in the schedule in Exhibit AF. That Pulier chose to reduce the tax liability of ACE in respect of those payments does not change the character of those payments. In any event, all of the payments were made before the end of December 2014, and therefore the evidence of the accused and Ms Sugar regarding the need to take advantage of the New Zealand end-of-tax-year (i.e. March 2015) was irrelevant.

798. I found Mr Hunter to be a poor historian due to the anxiety and depression he had suffered over a long period of time, the effluxion of over 10 years since the events in question, the fact he had made numerous statements to the police here and the authorities in the USA as well as giving evidence at his committal and sentence hearings. This gave rise to inevitable inconsistencies in his statements and testimony which were a fertile field for cross-examination. Notwithstanding that, whilst he was obliged to give evidence in accordance with the discount given to him for providing that assistance to the Crown, I accept that he was endeavouring to give truthful evidence and was prepared to concede occasions when where he had failed to do so in the past.

799. Generally, Mr Twynham gave his evidence in a straightforward fashion acknowledging evidence he had given previously including where that evidence was not truthful. His evidence was, however, somewhat evasive in respect of the following matters:-

1. When he first learnt of the earnout provision in the EPA.

2. When he first discussed the earnout provision with the accused.

3. Whether he was aware that the accused progressed the McAfee deal so as to receive a reward.

4. How the Pivotal TDs increased from $1.5 million to $6.9 million.

5. Mr Hunter’s disappointment with the sum of $750,000 was related to a salary “formula”, when he had no idea what the formula was.

6. The reason for deleting his text messages once he had discussed the events of 2013 with Mr Waldron in 2015.

800. He was, however, steadfast in his evidence that the McAfee deal was the accused’s idea, that it was structured to maximise the earnout payment and that it was Hunter and the accused’s idea to break down the Pivotal deals into nine separate TDs of less than $1million value to bring them within Hunter’s delegated authority.

801. In accordance with the directions of law that I have given myself, if I were to find that the accused’s evidence that he did not receive bribes from SMI and that payments received by him were for work done or to be done for ACE by him was true, or even if I was to find that it might be true, then there would be a verdict of not guilty in relation to Counts 1 to 7 and it would follow that there would be verdicts of not guilty to Counts 8, 9 and 10 on the Indictment.

802. I do not accept the accused’s evidence to that effect as being truthful nor do I accept that it might be true for the following reasons. First the accused had a close working relationship with Pulier and Twynham. The events which are the subject of evidence in this trial clearly took place in a dynamic commercial environment where large sums of money were being expended by the CBA on an emerging technology, which involved close co-operation on a commercial-in-confidence basis by those involved. This explained the close personal friendships that developed as established on the evidence. As soon as the EPA between CSC and SMI was signed on 29 October 2013, I find that the accused became aware of the provision of the earnout clause and immediately set out to facilitate revenue to be earned for the purpose of that clause by initiating the McAfee ELA proposal in which SMI would become the reseller of McAfee security software to the CBA, when the bank already had a contract in place for that service with HP. Within two days on 31 October he had provided the McAfee proposal to Twynham and informed Hunter of it, stating “here's $7 million for them.”

803. I find that the accused played an integral part in progressing the negotiations and contractual arrangements for the McAfee deal notwithstanding in the short term the CBA derived little commercial benefit from it. Whilst in the long term it did have commercial viability for the CBA, the execution of the contract before the end of December 2013, whilst mandated by McAfee, resulted in the revenue being included in the earnout provision, to the benefit of SMI.

804. I am also satisfied that the accused played an important role in the Pivotal deal that was executed on 25 January 2014 to ensure the revenue earned by SMI was included in the earnout clause. The adoption of Pivotal products had been raised by Pulier in early November 2013 and the accused had discussed the first proposal for the Pivotal deal with Pulier on his trip to the USA in December 2013. I am satisfied that what were ultimately nine separate transaction documents of less than $1 million each was done at the instigation of the accused to bring the Pivotal deal under the delegated authority of Hunter to execute and thereby avoid the CBA's procurement policies and an inevitable assessment of the commercial viability, as well assk risk and legal assessment. The manner in which those contracts evolved over a period of three weeks is best demonstrated by Exhibit AW, which is set out below. It is supported by the synopsis of internal SMI emails set out in Exhibit AX.

805. Whilst the evidence established that the accused travelled with Harte to Italy during his employment by CBA and met with executives employed by Tiscali, there was no evidence linking Pulier with Tiscali and it is commercially implausible that Goldstein would, through ACE, employ the accused for doing work on the Tiscali project, a project being promoted by Michael Harte. It was also implausible that the accused would be paid $1.65m in advance “for work to be done”.

806. Other than the Statements of Work and invoices produced by the accused by way of analysis by Lyonswood, there was no objective evidence from any other source either establishing or corroborating that any such work was done. The evidence of Mr Marsden establishes that the whitepaper and documents in Exhibit AU and Exhibit AY were meaningless as far as commercial implementation was concerned, i.e., they failed to convey a meaning that competent IT engineers, product managers or business analysts could interpret so as to construct a product, or otherwise provided no “deliverables”. I reach the same conclusion in relation to the whitepaper in Exhibit AAB, which on its terms is a guide for the development of “a new IT-as-a-Service Transformation Consulting Practice”, and is qualified by the statement that “this is intended to be illustrative, not prescriptive.”

807. I found that during his interview with CBA investigators on 17 December 2013 the accused told the following lies:-

1. That he played a small part in negotiating the McAfee and Pivotal TDs and it was mostly Tom Richardson’s team.

2. That he received in the order of $400 to $500K in payments from ACE.

3. That he had received payments from ACE between April and September 20143.

4. That Goldstein had found him and emailed him to do work for ACE.

5. That Hunter had done work for ACE as well but he did not know what.

6. That he disclosed the work he had done for ACE to Tim Whiteley.

7. That all payments from ACE went into his CBA accounts.

8. That he held accounts elsewhere in the USA and UK but did not disclose the ASB account into which four payments had been received between 4 November 2014 and 16 December 2014 totalling USD$1.3 million.

9. That he denied any knowledge of a connection between Eric Pulier and Goldstein.

809. I find each of the accused’s statements were untrue and that each was relevant to whether he corruptly received the payments into his accounts. I further find that in making each of the statements the reason the accused did so was because he feared that telling the truth might reveal his guilt in respect of each of the ten Counts on the Indictment namely, that the payments were received by him as rewards for directing procurement contracts to SMI to enhance the earnings of SMI in its sale to CSC so as to count towards the earnout payment, or that he aided and abetted Hunter to receive such payments.

810. The evidence of the accused was unsatisfactory in a number of other respects including that he lied about the purpose of the payment of $20,000 to Mr Hunter from the first payment of $100,000. In addition I find that the fact of his resignation and his provision of a draft Statement of Work to Hunter in circumstances where he must have known that Hunter intended to fabricate documents to conceal his corrupt payments demonstrated a consciousness of guilt by the accused. This was the only rational explanation for doing so, and it demonstrated his involvement in the criminal conduct alleged against him.

811. I further do not accept his explanation for the message sent to his wife on 21 December 2013 “By the way, confirmed $1.5m” related to his prospective earnings for two years work in Europe. Nor do I accept his evidence in respect of the following:-

1. His explanation for what he wrote on 31 October 2013, “So here’s $7m for them” was evasive.

2. His evidence in respect of the entry in Exhibit AL concerning being on the payroll was also evasive.

3. His evidence concerning APRA being a major consideration for the McAfee deal was exculpatory and disingenuous. The CBA already had McAfee security software in place supplied by HP, and there was no evidence APRA constituted a “pressing need” as submitted by the accused’s counsel.

4. I do not accept his evidence that the earnout was incidental to the McAfee deal.

5. I do not accept his evidence that he had very little to do with the Pivotal deal.

6. Nor do I accept the accused’s explanation for his file note in Exhibit Z. This was disingenuous evidence tailored to exculpate him from the receipt of monies as a bribe.

7. Similarly his evidence for the message in Exhibit E, pg. 2021 “$$landed…K disappointed” was inconsistent with any relationship between a salary negotiation by Hunter for employment with CSC and was consistent with the monies being paid by Pulier through TA consistent with the evidence of Mr Martinez.

8. I do not accept his evidence concerning the first payment of $100,000 for work caried out on Tiscali, at a time when he was employment by the CBA and/or in Italy under the direction of Mr Harte, in December 2013 (4 days claimed), January 2014 (5 days claimed), April 2014 (6 days claimed), and June 2014 (5 days claimed), a total of 20 days, unspecified as to the dates in each month claimed.

812. I therefore set aside the evidence of the accused and will determine this matter on the basis of the evidence adduced by the Crown. I find that the payments were received by the accused and Hunter at a time when they were both employed by the CBA and that at no time had either the accused or Hunter approval from the CBA for any outside contracting work. I find that the CBA, at the time the payments were received, had no knowledge of those payments and became aware of them upon examination of the accused’s CBA account in November 2014. Whilst using accounts that his employer had authority to examine would on its face readily expose any illegal activity, that proposition is answered in effect by the snippet in Exhibit H from Hunter stating, “I can't believe we were this stupid”. It is also clear from those snippets that Hunter had no knowledge of ACE – see Ex H, email subject “Who is the Ace owner?” sent by Hunter at 8:21 a.m. on 17 December 2014.

813. I therefore find that the payments subject Counts 1 to 7 on the Indictment were, by reference to community standards, corruptly received by the accused and the elements of the offences in those Counts have been established beyond reasonable doubt. I am satisfied that there is no reasonable hypothesis available on the evidence consistent with the innocence of the accused. Rather, it is implausible that the accused received the payments for work he did for ACE, and even more implausible that he would be paid a further $1.65m for work “to be done”, of which he received $1.3 million. There will be verdicts of guilty in respect of each charge.

814. I also find that the accused aided and abetted Hunter corruptly receiving the payments in Counts 8, 9 and 10 in the Indictment. At the time those payments were made no work had been done by Hunter for ACE. I have found that Hunter assisted in facilitating the McAfee and Pivotal deals so as to enable SMI to earn revenue for its earnout clause. It was the accused who passed on the banking details of Hunter to enable the three payments to be made into Hunter's account, who agreed to receive some of those funds on behalf of Hunter and provided Hunter with the Statement of Work which Hunter fabricated. I am therefore satisfied beyond reasonable doubt that the elements of the offences in Counts 8, 9 and 10 have been established and there will be verdicts of guilty in relation to each of those accounts.

Orders

815. I hereby enter verdicts of guilty in respect of each of the following Counts on the Indictment:-

816. On or about 16 May 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$99,971.02, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

817. On or about 29 July 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$199,980.26, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

818. On or about 8 August 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$299,980.40, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

819. On or about 4 November 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of $300,000.00m as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

820. On or about 12 November 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$300,000.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

821. On or about 10 December 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US $350,000.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

822. On or about 16 December 2014, at Sydney in the State of New South Wales, did, being the agent of the Commonwealth Bank of Australia, corruptly receive a benefit, namely a credit in a bank account in the sum of US$350,000.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

823. On or about 7 August 2014, at Sydney in the State of New South Wales, did aid and abet Keith Hunter, being the agent of the Commonwealth Bank of Australia, to corruptly receive a benefit, namely a credit in a bank account in the sum of US$330,000.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

824. On or about 27 August 2014, at Sydney in the State of New South Wales, did aid and abet Keith Hunter, being the agent of the Commonwealth Bank of Australia, to corruptly receive a benefit, namely a credit in a bank account in the sum of US$149,990.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

825. On or about 23 September 2014, at Sydney in the State of New South Wales, did aid and abet Keith Hunter, being the agent of the Commonwealth Bank of Australia, to corruptly receive a benefit, namely a credit in a bank account in the sum of US$149,990.00, as a reward for facilitating business opportunities for ServiceMesh Inc. with the Commonwealth Bank of Australia.

826. You are therefore convicted of each of the offences in Counts 1 to 10 on the Indictment.

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Decision last updated: 08 May 2024