Dell Ends Software Maintenance With Iran Bank

How Dell discovered and ended a small Quest Software maintenance contract with an Iranian bank.

The VAR Guy

March 22, 2013

4 Min Read
Dell Ends Software Maintenance With Iran Bank

Dell's (NASDAQ: DELL) recent buyout of Quest Software reveals just how tricky it is to manage mergers, acquisitions and international sales these days. A case in point: Dell discovered that Quest Software had  supplied software maintenance to Melli Bank PLC — a wholly-owned subsidiary of Bank Melli in Iran. The maintenance occurred before Dell's buyout of Quest. In a March 15 letter to the SEC, Dell disclosed Quest's small but potentially worrisome banking engagement — which Dell has since ended. Here are the details.

Dell's letter to the SEC disclosed that the company's Form 10-K contained information about the business transaction. Jump into the 10-K filing and you'll find this information:

"Iran Sanctions

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Securities Exchange Act of 1934. Section 13(r) requires an issuer to disclose in its annual or quarterly reports filed with the SEC whether the issuer or any of its affiliates has knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction.

We are disclosing the following information pursuant to Section 13(r) concerning activity by a UK affiliate of Quest Software, Inc. (“Quest Software”), which Dell acquired on September 27, 2012. The disclosure is regarding a maintenance services software renewal transaction with Melli Bank PLC valued at 106.13 British pounds (approximately $169.90 at the exchange rate for U.S. dollars on the renewal date) and marketing activity.

Quest Software specializes in business software. On September 10, 2012, prior to our acquisition of Quest Software, Quest Software (UK) Ltd., then a UK subsidiary of Quest Software, renewed two software maintenance licenses with Melli Bank PLC. The first license, for Quest Recovery Manager for Exchange software, had been in effect for seven years before the renewal, while the second license, for Spotlight on Messaging software, had been in effect for four years before the renewal. Recovery Manager for Exchange software enables users to search and retrieve message-level data and compare contents between different mailboxes. Spotlight on Messaging is a business software program that helps manage messaging and real-time communications and provides troubleshooting solutions. Marketing activity also occurred prior to and after the acquisition with respect to Quest customers generally, including Melli Bank PLC, but no transactions were concluded other than the license renewal transaction.

Melli Bank PLC is a wholly-owned subsidiary of Bank Melli in Iran. Melli Bank PLC is headquartered in London and is listed by the Treasury Department's Office of Foreign Assets Control as a Specially Designated National.

The profit on the license renewal transaction was no more than the annual renewal transaction value indicated above. Following our acquisition of Quest Software and our discovery of the renewal transaction, we terminated all software maintenance activity under the licenses. We will not engage in future activity under the licenses."

Assuming the decimal is in the right place, we're talking about an extremely small business transaction: US$169.90. But any dollar amount flowing to a technology company from a bank with ties to Iran could have raised some serious red flags.

The big question for Dell: What type of e-discovery software did you use to successfully uncover the potentially worrisome business transaction?

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