back to article Alleged $17.5m fraudster accused of duping HPE out of 42,000 servers

Peter Sage, the imprisoned "serial entrepreneur" and one-time principal of the company Space Energy, is said to have defrauded Hewlett Packard Enterprise out of tens of thousands of servers in a scam that unfolded over three years. Court documents obtained by The Register reveal that HPE sold Sage's Space Energy venture a …

  1. Sampler

    I don't see a problem, if HPE were prepared to sell at the price then that's their own problem if he resells, yeah, they lost out on the difference they were going to get from those customers (if they'd bought), but, they still made a profit, tough shit really.

    As for the investments, if you're going to pour your life savings into one company, there's a phrase about eggs and baskets you might want to look up, again, no sympathy for the greedy.

    Yes, the guy's a total asshole, but, he's only hurting other assholes, HPE can obviously afford to sell them at the price they gave to him, so really, they're just screwing the rest of us (I know, economies of scale blah, blah, but obviously the scales are tipped in HPE's favour if he can make a profit with his own overheads).

    1. Anonymous Coward
      Anonymous Coward

      There are export regulations, HPE are allowed to sell to companies who resell, but according to the law they also need to know which countries are involved etc. etc.

      It's basically a garbage US law that makes life miserable for everyone and probably only hurts smaller players to keep the big corporations happy. Without the law, I agree with your point though.

      1. Peter2 Silver badge

        Mmm.

        Companies produce at $CostPrice, which realistically is a worldwide constant. They then sell into each market at varying $wholesale and $RRP, with the difference justified as being $shipping and $tax.

        Yet it's often possible to buy two products at $RRP in the USA, then pay $shipping and $tax for import to the UK for less than the cost of one products $RRP in UK.

        If it's not illegal for companies to sell at these prices in different areas, it shouldn't be illegal for consumers to buy at a cheaper price, imo.

      2. Anonymous Coward
        Anonymous Coward

        @AC Export Laws

        US Export restrictions are just a fig leaf lame excuse sometimes given for price fixing. Price fixing isn't illegal, Apple has been doing it for ages. Actual US export restrictions are mostly UN sanctions with some icing, such as the old "no selling to Cuba" type stuff.

    2. Prst. V.Jeltz Silver badge

      I was thinking the same thing. A big order and a bulk discount is beneficial to both sides.

      Hence you have so many flash-in-the-pan dodgy energy companies that are basically pen pushing paper shuffling parasitic middle men. (but its still legal and apparently laudable)

      They never produced any energy

      They never stored any energy

      They never delivered any energy

      They just bought Wholesale , ie they guaranteed the real energy companies a certain amount of volume at a certain price.

    3. Sharpy68

      Sampler

      Ok Sampler, I happen to be one of the investors you single out as greedy and an asshole.

      I would like to thank you for your heartfelt sympathy and advice, but I'm afraid to say you're the asshole here.

      You see only real assholes go making sweeping statements like you without checking your facts first and thinking about what harm your words might cause.

      At the time of investing, the banks weren't paying interest, my pension plan had just taken a battering due to a fund managers decision not mine, house prices were falling, Lehman's and other major financial institutions were collapsing etc etc etc

      I also tried to spread the risk only to have 2 other "safer investments" go under, so think before you open your mouth next time.

      This whole sorry affair made me so ill I ended up in hospital in a coma after feeling so stupid I tried to take my own life.

      You are a coward and an idiot for saying what you did and I'm sure if you take a look at yourself some time, I'm sure you've made bad decisions too.

      1. Sampler

        Re: Sampler

        So, you admit greed, you had money, but you wanted more, more than the interest you'd get in the bank, yet I'm the asshole when you rolled the dice and they didn't come up in your favour because you made three poor decisions?

        Sure, sucks to be you, especially as it sounds like your life resolves around money if you tried to kill yourself because you'd lost it, put you get no sympathy here for your sad tale of woe, idolising money over relationships with other people will never end well, I can't for a minute believe if you had stable, worthy relationships with other people you'd try to kill yourself.

        +10 Irony bonus for making broad assumptions about myself whilst decrying broad assumptions = )

    4. Anonymous Coward
      Anonymous Coward

      Bit more complicated than that .......................

      Whilst its easy to just assume HPE are trying to rip off customers, the detail is actually important. You will find its not just HPE who have these policies, all other vendors will as well.

      As someone else has said, its mostly export regulations (not just US ones, every country has them) that are a big part of this! With technology IP it is the technology company who has responsibility for where their products actually end up, NOT the reseller or even distributer. HPE could, and companies do get fined if their product is exported to a blacklisted country.

      This is why his defence was a load of baloney, whilst he may own the physical asset so can do what he wants within his own company, he doesn't own any of the IP in that asset and so cannot pass that on with out approval.

      They are a by-product of the cold war where the Soviets where trying to use shell companies to get hold of Western technology both to use and reverse engineer, North Korea and other sanctioned countries still try it today. 42k servers would make a nice HPC rig for some nuclear testing .........

      The second part is actually more to do with support and end user experience.

      To give you a real example, when I worked there we had one customer who had bought 100 servers "on a deal" from a dodgy reseller but was experiencing failures when they booted them up and understandably were very not happy.

      On investigating it was found the servers were originally supposed to be part of a shipment into another customer (they bought and paid for their consignment but the reseller ordered 100 more than needed from the distributor) but where siphoned off by the reseller in their integration centre. They put them in a leaky shipping container in a field for 6 months whilst they waited for a buyer, when one came along they stripped the packaging (because it got wet) shipped them to the customer as new (even though the warranty was 6 months in) and then just blamed HP when wet circuity exploded on power up! Cue one p*ssed off customer, a 100 servers that needed scrapping and the reseller walks off with the money ...........

    5. Anonymous Coward
      Anonymous Coward

      You must be blind if you are not seeing this as a problem. The only reason they sell at that price is because of the agreement that the item is being sold for use and should not be sold to resellers.

      I don't know how big the HP discounts are but for Cisco kits they are sometimes over 60% compared to retail prices. In all of these transactions you are forced to sign documents indicating that you will not sell the equipment to resellers and that the equipment is for your own use. If this was legal we would all be making a fortune setting up sham business buying the equipment in bulk and then reselling them. This would undermine the OEM retail market and the OEM would just respond by restricting or withdrawing the discounts

      Most of the larger resellers we sell to actually have us sign documents to verify if we don't have any of these discount arrangements with OEM because a few have been gotten into trouble by purchasing gear acquired with these arrangements. This is why I find this guys defence to be lacking. Even the resellers get sued in these cases, I guess this is the reason the resellers closed shop.

    6. P. Lee

      What it really comes down to is that the bulk end of the market can't be sustained so the vendors skim from the smaller purchasers (who expect lower "economies of scale") to fund it. That only works if you can prevent the bulk market redistributing.

      As for the argument that you own the asset but not the IP in the asset, that's morally rot. If I buy a DVD, I can sell it on. If I start selling copies, that's a different issue. The fact that the US (and EU) government colludes to outlaw the grey market through IP law is irrelevant. Its indicative of a society in economic and moral decline. As for not selling stuff to "bad" regimes... really? That that fuss over Cuba while the US messes around in Vietnam, Central and South America, Libya, Iraq, Afghanistan? Do you really thing the Iranian government can't get its hands on plenty of compute power? Is this about, stopping them doing bad stuff or retarding their economic development? Maybe half the country dislikes their president - perhaps the government should be toppled and one more friendly to foreign powers installed...

  2. John Smith 19 Gold badge
    WTF?

    What exactly does a solar energy company need with a shedload of servers?

    The sun's rising and falling being a fairly predictable event.

    Can I just check he is actually F all to do with the well known software company which shares his surname?

    Of course being involved with their management would make some of their behavior over the years more understandable...

    1. gazthejourno (Written by Reg staff)

      Re: What exactly does a solar energy company need with a shedload of servers?

      Peter Sage is not connected to Sage the accountancy software company.

      Some of his previous business interests, however, are ... eye-opening.

      1. John Smith 19 Gold badge
        WTF?

        "Peter Sage is not connected to Sage the accountancy software company."

        Good to know.

        "Some of his previous business interests, however, are ... eye-opening."

        Yes some of those businesses do earn the "Dodgy Business of the Year" award.

  3. Peter 26

    $30K?

    I don't see why they went to this effort for $30K profit. Was it to try to make the company look legitimate to get investors? Maybe the con was to get investors money?

  4. Anonymous Coward
    Anonymous Coward

    Was there a so big market for solar panels in Iraq and Afghanistan?

    They doesn't look to me two countries were people long for solar panels - both small and large installations. Looks like a cunning plan to avoid investors wanting to visit the plants...

  5. Bob Rocket

    There is nothing wrong with a company offering a discount on a product tied to certain terms and conditions, one of which might be that you can't resell it outside of a particular area.

    If you do want to sell it outside of that area then they will sell you one without the discount.

    If you accidentally sold a discounted item outside of the permitted area then it would be a civil matter of breach of contract.

    If you falsely enter into the discount contract with the intent to breach the contract and profit by your actions then it is fraud and a criminal matter.

    From what I can gather from the reports, HPE are claiming fraud, in his defence it seems he is trying to show non-intent to breach the conditions (they were originally for internal use) and anyway he assumed that it was a normal volume discount and not a restriction based discount therefore he was entitled to dispose of them as he saw fit.

    If he is successful then the issue will revert back to the civil breach of contract but as all the money has gone, HPE get nothing.

    1. GruntyMcPugh Silver badge

      "Intended for Internal use"

      Consider this:

      "Court documents obtained by The Register reveal that HPE sold Sage's Space Energy venture a total of 42,611 "units of storage and server networking products"

      Let's round that up to 43,000 units, and assume each was a 1U device. That's 1000 racks of hardware. That's a pretty big datacentre, over 15x bigger than the one I currently work in, twice that of a bank I did a contract at not so long ago (and they had two mirrored datacentres). Maybe a 'storage unit' was an individual disk? I hope so, and that my 1U estimate is grossly large (although countered by devices larger than 1U), because if it isn't, HPE should have noticed the volume, and tried really hard to sell datacentre design, Infrastructure support, etc, as that's a massive setup with lots of extra potential earnings, and should have got HPE interested in a site visit and a good old schmooze. Why a company that deals in solar panels would need a datacentre with a footprint the size of a solar farm escapes me. The size of it shouldn't have escaped the HPE sales reps though, Should have stuck out like a sore thumb.

  6. Anonymous Coward
    Anonymous Coward

    Profiteering - helpfully renamed 'customer fraud'

    Euphemisms.

    Why the law goes along with it is the question.

    As another poster remarked, it's really just sanctions in a different package.

    If you buy standard goods, that is. If you buy something with a US plug and then force it into a UK socket, it's your fault for being an idiot.

    If you find Apple can sell iPads as cheaply as chips in Dubai, or Bombay, and you are going that way, then why not get one for yourself and friends?

  7. Aviato

    This is a big problem for companies like HPE. So HPE sells a huge number of laptops to someone on a phony large deal with special pricing and they are targeted for the Chinese market. (maybe a school district in my example). They would contain Chinese version operating systems, power cords, etc.

    Then the fraudster ends up selling these laptops in Europe at some shady storefront or some online market place for a nice profit. The buyer calls HPE support to complain they got a Chinese laptop and HPE has to now work to make it right for the consumer (or have angry customers).

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2019