Investment research firm Hindenburg Research has released a report alleging that server component supplier Super Micro Computer is a “serial recidivist” with a host of accounting and sanctions issues and other irregularities.

Hindenburg Research spent three months investigating the $35-billion company. It compiled exhaustive evidence from public records and interviews with former Super Micro employees and sources at Super Micro’s trading partners. The investigation noted that those developments have taken place as Super Micro was losing market share and experiencing customer service issues.

Super Micro keeps it all in the family?

The red flags uncovered by Hindenburg Research are reminiscent of those that led to the United States Securities and Exchange Commission (SEC) issuing a cease-and-desist order against Super Micro and its chief financial officer, Howard Hideshima, in 2020, it said. The SEC action followed the rehiring of executives who left after Super Micro’s delisting from the Nasdaq exchange in 2018 for failing to file financial statements. 

Hindenburg Research noted, “Normally, when companies are caught in major accounting scandals, they will fire and permanently distance themselves from the culpable individuals to show that they take corporate governance seriously.”

However, three key Super Micro executives — one vice president and two senior vice presidents — who resigned in 2018 are back in leadership positions. Hideshima was hired as a consultant by Super Micro’s business partner Ablecom Technology, a company run by Super Micro CEO Charles Liang’s brother.

Among other alleged related-party dealings, Super Micro did $1 billion in business with Ablecom and Compuware in the last three years. Compuware is run by another brother of CEO Liang. According to Hindenburg Research:

 “Super Micro provides components to Ablecom and Compuware, who simply assemble them and sell them back to Super Micro. […] Both entities appear to work almost exclusively with Super Micro.”

Super Micro returned to old habits?

Super Micro pleaded guilty to violating sanctions against Iran in 2006. Hindenburg Research found evidence that Super Micro is violating sanctions on supplying high tech to Russia through transshipment:

 “At least 46 companies that handled Super Micro products to Russia are now under OFAC sanctions or on U.S. Government watchlists.”

Super Micro also reportedly does business with Chinese companies on US government watchlists.

Source: Super Micro Computer

Many of the accounting irregularities found by Hindenburg Research were first alleged in a suit filed in April by Super Micro’s former head of global services. Those charges include misallocating revenue to boost profit margins and prematurely booking revenue from undelivered or faulty equipment.

Super Micro did not immediately respond to a Cointelegraph request for comment on the report.

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