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CSC files lawsuit against Eric Pulier

Kansas investors may be interested to learn that CSC, the company that purchased ServiceMesh in Oct. 2013 for $260 million, has filed a lawsuit against ServiceMesh's CEO, Eric Pulier, in which it alleges fraud was committed in order to increase the company's value. At the time of the purchase, the high price was justified based on a large contract ServiceMesh had won with the Commonwealth Bank of Australia.

According to reports, two executives at the Commonwealth Bank were arrested and charged with fraud for reportedly accepting large monetary gifts from a trust set up by Mr. Pulier. After those arrests occurred, CSC fired Mr. Pulier and then filed the lawsuit against him.

CSC is seeking to recover the full purchase price of $260 million from him. Police report that the two Commonwealth Bank executives are facing bribery charges, and Australian police there characterized the $2.9 million payments they received as illegal kickbacks they allegedly received in exchange for awarding ServiceMesh lucrative contracts. When CSC sought to interview Mr. Pulier about the payments, he allegedly refused to speak with them unless they would guarantee they would not pass along what he had to say to Australian police. The company refused his terms and then filed the lawsuit.

The case demonstrates the importance of conducting a thorough analysis of the financials of any target business a company is interested in acquiring. When business dealings have been fraudulent in order to increase the value of a company, shareholder litigation is almost certain to follow. Companies that are interested in acquisitions or mergers may want to get the help of a business law attorney for help with in conducting thorough and exhaustive due diligence of the potential target.

Source: Forbes, "CSC sues Eric Pulier--alleges fraud as a valuation-increasing strategy," Ben Kepes, May 18, 2015.

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