Top manager at U.S. firm privately sold high-tech in Russia

Extreme Networks

28/06/2023 14:00

By David Gauthier-Villars and Aram Roston
       June 28 (Reuters) - U.S. technology company Extreme
Networks Inc said last year it had suspended all business
activities in Russia to show solidarity with the people of
Ukraine "living under attack."
    But Reuters has found that, as the publicly-traded U.S. firm
was unwinding its Russia operations, its most senior manager in
the region did not stop doing business there.
    Sergey Gusakov, while still working as Extreme's manager for
former Soviet republics, created his own company in April 2022
to supply Russian clients with IT equipment made by a competitor
of his employer, according to interviews with two people
familiar with the matter, as well as Russian corporate and
customs records.
    The IT equipment sold in Russia by Gusakov's company
Vektor-T is assembled in China and contains U.S.
microprocessors, according to the people familiar with the
matter and photographs seen by Reuters.
    The upshot: microprocessors produced by U.S. chip companies
that have banned sales of their products to Russia - as Extreme
did - have made their way to the country embedded in Chinese
equipment, illustrating the limitation of U.S. trade
restrictions.
    A Reuters investigation late last year showed how voluntary
export bans by tech companies and broader Western sanctions
adopted after Moscow launched a full-scale invasion of Ukraine
in February 2022 haven't stopped billions of dollars of computer
and other electronic components from flowing into Russia through
networks of third-party suppliers.
    Contacted by Reuters about his private business, Gusakov
said: "This is fiction. Goodbye."
    Gusakov has been running his parallel venture for more than
a year despite a co-worker alerting Extreme's top management in
summer 2022 that his involvement in sales of technology on the
side to Russia could violate company rules.
    "These violations will lead to a heavy strike to the
reputation of the Extreme company against the background of the
war in Ukraine," the complaint said. 
    Asked about Gusakov's side activities, Extreme spokespeople
told Reuters that the matter was subject to an investigation by
the company's legal department and outside counsel. 
    They declined to comment on Vektor-T's operations, saying it
was outside Extreme's control, and did not respond to questions
about Gusakov's current status with the company.
    The spokespeople said Extreme "takes very seriously its
obligations to comply with U.S. export controls" and does no
business in Russia.
    Last year, Reuters revealed how Extreme, before the invasion
of Ukraine, provided IT equipment to a U.S.-sanctioned military
company that makes missiles for the S-400 air defense system,
one of Russia's most sophisticated weapons.
    In October, Extreme confirmed Reuters' findings, saying its
products had gone to "bad actors," and told U.S. regulators it
would investigate current and former employees for possible
involvement and implement "best in class" export controls.
    
    MANY RESELLERS
    In April last year, Extreme reorganized its regional office
by relocating Gusakov and a few members of its Moscow staff to
Kazakhstan, according to the two people familiar with the
matter. Gusakov, who joined Extreme in 2010, according to a
profile published on the company’s website, retained his title
as regional manager for the CIS, a group of former Soviet
republics.
    But on April 13, 2022, Gusakov co-founded OOO Vektor-T in
the Russian city of Oryol, Russian corporate records show. He
did not inform Extreme, according to the people familiar with
the matter.
    On Vektor-T's website, which was registered three weeks
earlier, the company says it develops and produces a range of
computer networking equipment for the Russian market. The
business posted revenue of about $1 million last year, according
to a legal filing.
    Products sold by Vektor-T are manufactured in China by Yunke
China Information Technology Ltd, which is better known under
its DCN brand name, according to the two people familiar with
the matter. Photographs obtained by Reuters of the insides of
switches sold under the DCN and Vektor-T brands show that they
are identical.
    Gusakov and Vektor-T did not respond to questions on the use
of DCN technology. DCN confirmed exporting products to Russia
but declined to comment on its business relationship with
Vektor-T.
    In the 12 months to March 31, DCN exported at least $11
million worth of equipment to Russia, including shipments
destined to Vektor-T, Russian customs records show.
    DCN products contain U.S. microprocessors made by Marvell
Technology Inc, based in Wilmington, DE, and Lattice
Semiconductor Corp, of Hillsboro, OR, according to the two
people familiar with the matter. The photographs obtained by
Reuters of the insides of switches sold by DCN and Vektor-T
clearly show one of each.
    A senior DCN executive told Reuters that the company relies
on semiconductors from Marvell for some of its products, saying
the U.S. company "has many resellers in China." Regarding
Lattice, the executive first said DCN uses their computer chips,
but later retracted, saying the company doesn't use them. "The
U.S. technology proportion of DCN products is very small," he
said.
    The DCN executive declined to comment on whether the Chinese
company has authorizations from Marvell and Lattice to export
their products to Russia.
    Marvell emailed Reuters that it does not sell to Russia and
that all its distributors and their customers in China must
certify that products will not be resold to Russia. A company
spokesperson said Marvell had not shipped directly to DCN for 10
years but added it could not always track where its products
were ending up.
    "It is possible that some of the distributor's customers may
further resell the products to companies to whom Marvell or its
distributors have no knowledge, visibility or control," the
spokesperson said. 
    Lattice told Reuters it stopped all sales to Russia when
Ukraine was invaded and is in full compliance with U.S. export
regulations. The company didn't address Reuters' questions on
whether DCN was a customer.

 (Reporting by David Gauthier-Villars in Istanbul and Aram
Roston in Washington;
Editing by Daniel Flynn)
 ((david.gauthier-villars@thomsonreuters.com
daniel.flynn@thomsonreuters.com; +44 20 3197 3000; Reuters
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