Cisco Systems, Inc. (NASDAQ:CSCO) is in soup as Buzzfeed reported that the company was involved in illegal transactions in Russia, and the U.S. Senate is not too happy. Reportedly, Senator John McCain, Head of Armed Services Committee has sought a deeper probe into the allegations. McCain wants strict action against Russia. Cisco has been accused of changing their sales statements and booking the deals under a fake client to avoid the sanctions.
The company has confessed changing the names of some of the clients, but it claimed that it was not harmful to anyone and denied having compromised on sanctions imposed by the U.S. on trade with Russia. McCain stated that the findings were disturbing, and further investigation could help resolve the matter and help find whether Cisco involvement was there or not. Cisco’s outgoing CEO, John Chambers, is known well to McCain and had helped the latter in his presidential elections in 2008 with a financial support of more than $1.3 million.
The Russian operations have already got Cisco in trouble as the company is currently under the vigilance of Foreign Corrupt Practices Act (FCPA) for hiding cash transactions in Russia. The current accusations of Cisco selling equipment to Russian government agencies that the law prohibits are quite serious, but the company negates these allegations. Economic sanctions have been imposed by the U.S. and European Union that limit dealing with Russia because of Ukraine and Crimea issues.
Cisco Denies Allegations
The reports by Buzzfeed are based on documents provided by anonymous sources and Cisco said that it had examined the papers and found nothing wrong. In fact, the company said that it was working in full compliance with the U.S. and E.U. sanctions. Clarifying the allegations of bookings made on fake client names, it said that the changes were done to fix a software glitch that had put the names wrong initially. Apart from correcting the flaw, there was no other inclination.
Meanwhile, Russia has not proved to be a beneficial market for the company ever since the sanctions were first imposed. Chambers said last week that the Russian market was being problematic for the company, and the sales had fell considerably to 41% as compared to the same period in 2014.