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Thread: Seagate Fined for Breaching Export Bans

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    Seagate Fined for Breaching Export Bans

    Seagate are in trouble over sending HDD to blacklisted companies in China (for an entire year!)

    Which is odd, considering they make them in China (amongst other places).

    https://www.reuters.com/legal/seagat...ei-2023-04-19/

    Seagate's position was that its foreign-made drives were not subject to U.S. export control regulations, essentially because they were not the direct product of U.S. equipment.
    As with all big corp fines it seems small fry:

    Seagate Technology Holdings PLC has agreed to pay a $300 million penalty in a settlement with U.S. authorities for shipping over $1.1 billion worth of hard disk drives to China's Huawei in violation of U.S. export control laws, the Department of Commerce said on Wednesday...

    ...Seagate's $300 million penalty is due in installments of $15 million per quarter over five years, with the first payment due in October. It also agreed to three audits of its compliance program, and is subject to a five-year suspended order denying its export privileges.
    So for £1.1bn they get a 25% fine but spread over 5 years.
    Last edited by ik9000; 20-04-2023 at 01:16 AM.

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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by ik9000 View Post
    So for £1.1bn they get a 25% fine but spread over 5 years.
    If Seagate make a 25% profit margin on those drives, then the fine wipes out any money Seagate would have made.

    Hard drives aren't a very high profit margin item these days.

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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by DanceswithUnix View Post
    If Seagate make a 25% profit margin on those drives, then the fine wipes out any money Seagate would have made.

    Hard drives aren't a very high profit margin item these days.
    True it depends on turnover vs profit but also if the aim is just to wipe out profit it would risk creating a gambling incentive. Don't get caught = Keep profits. Do get caught = lose profits but cover costs and the "customer" still gets product so company relationship maintained with eye on future improvements in political scene. Business risk neutral in worst case if they cover their costs, and assuming they have enough profit coming from elsewhere to appease shareholders etc. Now if it goes beyond pure profit and eats into costs then it becomes actually punitive, however how far do their gov want to go in harming a company they otherwise want and need to keep friendly and operating in the US?

    According to Seagate financial updates their gross profit margin is circa 30% but their operating margin is 17-18% so it would hurt them. However they also reporting:
    revenue £11.7bn so operating margin = £2bn approx. They list £1.7bn generated cash flow and £1.3bn free cash, with shareholder payouts £2.4bn. I might be failing to understand the accounting jargon, but it would seem they could pay the fine off with cash reserves and/or just pay their shareholders less dividend and be fine. I'm not sure why a 5 yr drawdown is needed.

    https://investors.seagate.com/news/n...s/default.aspx
    Last edited by ik9000; 20-04-2023 at 11:15 AM.

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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by ik9000 View Post
    Which is odd, considering they make them in China (amongst other places).
    Seagate sold the drives to Huawei between August 2020 and September 2021 despite an August 2020 rule that restricted sales of certain foreign items made with U.S. technology to the company.
    That seems to be the issue - They used US machines, or other US IP, to furnish 'the enemy' with stuff.
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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by Ttaskmaster View Post
    That seems to be the issue - They used US machines, or other US IP, to furnish 'the enemy' with stuff.
    It looks like China has a flash chip industry, so I guess this just pushes them towards all SSD adoption. I often wonder if these "punishment" activities will really make China stronger in the long (and perhaps medium) term.

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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by ik9000 View Post
    So for £1.1bn they get a 25% fine but spread over 5 years.
    It's the same thing, over and over again, where the fines are less than the profits made. No wonder they're all at it, it's still good business.

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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by Hoonigan View Post
    It's the same thing, over and over again, where the fines are less than the profits made. No wonder they're all at it, it's still good business.
    More often the fines are not paid and therefore irrelevant. Like Intel's EU fine for being a monopolist in 2009. That has been dragging on for decades now, with Intel having managed to get the conviction thrown out on a technicality and last I heard were actually demanding that the EU pay them half a billion in interest on the fines that were returned to them.

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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by DanceswithUnix View Post
    ...

    That has been dragging on for decades now, with Intel having managed to get the conviction thrown out on a technicality and last I heard were actually demanding that the EU pay them half a billion in interest on the fines that were returned to them.
    Dealing with the elephant in the room first, no, I'm not a fan of the EU. However, the comment that follows would be the same were it anybody other than the EU that issued the fine.

    First thought, whether 'technicality' or not, it was still thrown out by a court. Presumably, that means it fell foul of some law, somewhere. So, thrown out is thrown out. Until/unless it gets un-thrown-out, of course.

    Second, when major political entities (whether EU or not) go about dishing out huge fines, they are essentially penalising companies (or individuals, where appropriate) on at least partially political grounds. And in the process, causing potentially major headaches and huge costs, to that company or individual. So if they screw up, they deserve to be compensating those that incurred such costs, be it interest on fines or legal fees, because of their actions.

    It's refreshing to see it happen, to be honest.

    HOWEVER .... that is just a first take. I also have no particula love for Intel, or ANY large corporate for that matter, because I don't believe for a nano-second that care about me, or the billions of others, individually. We're just breathing sources of profit to them. So .... if they 'mishehave', get caught and get clobbered with mahooooooosive fines? Great. Even if it's the EU.

    But when those large political bodies, EU or not, throw their weight around, as they do, it behooves them to get it right, and compensate those suffering as a result when they don't.

    As a principle, that ought to happen more often. Ever been on the receiving end of, say, a demand (with menaces) from, oh, HMRC, requiring you to pay money you don't owe, 'cos their "estimates" were wrong. If it happens, I'd bet the person paying it not only wants their money back, but interest lost too, while they fight it and win, so get it reversed. And the costs they incurred too. I sure would.
    A lesson learned from PeterB about dignity in adversity, so Peter, In Memorium, "Onwards and Upwards".

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    Re: Seagate Fined for Breaching Export Bans

    there is something peverse about getting off on technicalities however. If you can prove someone did X that should suffice. If penalty Y didn't comply with subsection 19.12.15d it should just require an adjustment in the penalty not lead to the whole thing getting thrown out

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    Re: Seagate Fined for Breaching Export Bans

    The number of criminals who get off on 'technicalities' is cause for concern, particularly where people have died as a result.
    The same is true of certain laws and/or the way in which they are applied or interpreted.
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    Re: Seagate Fined for Breaching Export Bans

    It depends in the 'technicality'. Bear in mind the degree of power the state has when it decides to prosecute very often gives a huge power imbalance. Not so much when the person (physical or legal entity) happens to be a massive multinational .... or an extremely wealthy individual for that matter. Most of us would struggle to find £250/hour to pay a solicitor for anything involving lots of hours of work, but some individual can afford to sic a team of dozens of top-flight lawyers on to a case, especially if the alternative is many multiple millions of fines, penalties or even in civil cases, damages.

    Which is why in criminal cases the burden of proof is heavy, and the prosecution, with the power of teams of government lawyers, not to mention police (and oher services) on the investigatory side, have to prove their case.

    Yes, technicalities can be those actually guilty get away with their crimes, and that stinks, but if you're the one being pursued by the legal heft of a nation state, you're going to be wholly glad that they do have to be able to prove their case.

    If someone actually guilty gets away with a crime on a technicality, then that's evidence that law-makers didn't do their job right in writing the law. So fix it. It all depends on what the technicality is.

    Remember the trial of Tony Martin? A significant part of the prosecution case was that Martin claimed to have fired his shotgun "part way down" (my words, not direct quote) the staircase. Prosecution asserted he fored from the bottom, where he'd set an ambush, and that the 'absence' of gunshot residue where he said he fired from proved he was lying. Rsult = conviction (on several things, but I mean murder).

    Fast forward a few years to the apeal court hearing, by which time forensic ests had improved and even at that much later date, showed gunpwder residence where he said he was, that the prosecution refuted. Small amounts, but nonetheless, evidence that, at trial, would have supported his case, would have undermined the prosecution argument and might have led the jury to think differently about his account.

    It could be that he was telling the truth, and that the later forensic tests showed that. Or, for all I know, that little bit of gunpowder residue sloated up there on the breeze, or was secondary transfer from a investigator's clothes, and the prosecution were right all along.

    I don't know, and nor do prosecutors. I guess only Tony Martin does know.

    The point is that if that testing had been available at trial, the jury might have reached a different conclusion. We'll never know, and though the appeal court quashed the murder conviction (for manslaughter) it asn't on that evidence because, IIRC, they aren't there to second-guess what the jury might have made of those tests, had they known of them, which they didn't.

    He could have been acquitted, at the initial trial. Or not.

    Either way, the appeal cort overturned murder, but onn grounds of diminished responsibility not forensic evidence. Of such fine distinctions are trials decided .... sometimes wrongly. Technicalities can matter, both ways.

    And yeah, the Intel thing is a different set of issues. My point is broader than that, though.
    A lesson learned from PeterB about dignity in adversity, so Peter, In Memorium, "Onwards and Upwards".

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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by Saracen999 View Post
    But when those large political bodies, EU or not, throw their weight around, as they do, it behooves them to get it right, and compensate those suffering as a result when they don't.
    I quite agree. I just think here the EU got it right the first time around. And the second time around. But Intel managed to appeal until it was decided that the evidence was not to a high enough bar.

    If I'm reading it right, and it was a very quick skim read, they were happy to say that Intel was doing anti competitive deals against AMD, but you can't actually prove 100% that AMD were really harmed by them?

    Intel were selling a junk product by the bucketload, and the PC industry was clearly scared as hell to touch AMD. Seems pretty clear cut to me.

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    Re: Seagate Fined for Breaching Export Bans

    Quote Originally Posted by DanceswithUnix View Post
    I quite agree. I just think here the EU got it right the first time around. And the second time around. But Intel managed to appeal until it was decided that the evidence was not to a high enough bar.

    If I'm reading it right, and it was a very quick skim read, they were happy to say that Intel was doing anti competitive deals against AMD, but you can't actually prove 100% that AMD were really harmed by them?

    Intel were selling a junk product by the bucketload, and the PC industry was clearly scared as hell to touch AMD. Seems pretty clear cut to me.
    I'm certainly in the camp with those of the opioion ntel aren't particularly the good guys. Very rarely are companies with a dominant market poition the good guys. It's how they became dominant in the first place. But usually, nor are those being dominated by thegood guys, AMD in this case. It's more, IMHO, that dminant players pull nasty shi....stuff, because they can, and smaller cmpanies don't because they can't. But if they eve get big enough, they will too.

    Which is why I have some sympathy for Intel. If they got fined, forked over a shedload of mone and then the fines got tossed then, technicality of not, the fines were tossed, and they should be entitled to compensation for lost earnings on money they shouldn't have had to pay out.

    I haven't read up on the story at all, though. I did at the time, some years back, but am not interested nough in the shenanigans to bother refreshing myself on it now.

    My point really, I guess, was that so much in law seems on rest on some prety fine distinctions, and "technicality" is a term which may or may ot be a bit loaded, depending on who is using it and how they're using it. Overall, I am not fond of either INtel or the EU and if they take legal bites out of each other, my level of interest is roughly about getting some long forks and marshmellows, sitting back and toasting them, while I watch the fight. I sure don't much care who wins, but if Party A lob big fines about at Party B, they shouldn't whine about it if they come unstuck.
    A lesson learned from PeterB about dignity in adversity, so Peter, In Memorium, "Onwards and Upwards".

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    Re: Seagate Fined for Breaching Export Bans

    As an aside, anyone notice the press article about the "eco-hypocrit" leader of Extinction Rebellion? Allegedly, according to said article, she drives a diesel car (was photographed getting in), and buys food in non-recycleable packaging?

    That did make me laugh.

    But talk about the sublime to the ridiculous. EU/Intel catfight and billions in fines/costs in one breath, to her ride of choice and plastic food containers? Quality media, eh?
    A lesson learned from PeterB about dignity in adversity, so Peter, In Memorium, "Onwards and Upwards".

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