Authored by Jeremy Portnoy via RealClearInvestigations,

The Securities and Exchange Commission paid $10.7 million to store its electronic data at a Maryland facility that was allegedly certified by a company that does not exist.

AiNET Corp. and its former CEO Deepak Jain recently agreed to pay $1.8 million to settle allegations that they violated the False Claims Act by knowingly defrauding the government. The settlement does not contain an admission of guilt.

Key facts: When the SEC began looking for a new data center in 2012, it required applicants to have a Tier III certification. That means the data center is fully operational even when undergoing maintenance.

Jain submitted paperwork to the SEC showing that AiNET had been certified by the company Uptime Council. No such company exists.

The Department of Justice later alleged that Jain wrote the certification letters himself, and that nobody had ever inspected AiNET's data center. Jain allegedly purchased a web domain for Uptime Council to make it appear like a legitimate business.

The name also closely resembled the Uptime Institute, a legitimate company that certifies data center infrastructure.

When SEC employees toured the facility before signing the contract, an AiNET employee allegedly prevented them from viewing infrastructure that would have shown the center did not meet the claimed standards.

The SEC later experienced issues involving security, cooling and power and spent additional money and resources addressing them.

When the SEC requested a new certification in 2017, Jain allegedly drafted another Uptime Council letter stating that the center had been reinspected. Prosecutors claimed no inspection occurred.

The SEC stopped using the facility in 2018. Prosecutors allege that Jain was still advertising the data center's false certification to private customers as of 2024.

Jain's attorneys previously maintained that AiNET fulfilled the contract and that no SEC data was lost or compromised.

Summary: An independent certification is not much of a safeguard when the contractor allegedly creates the certifier himself.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com.