By Vernon Silver - Nov 18, 2011 11:07 PM GMT+0700
Hewlett-Packard Co. (HPQ) equipment worth more than $500,000 has been installed in computer rooms in Syria, underpinning a surveillance system being built to monitor e-mails and Internet use, according to documents from the deal and a person familiar with the installation.
The gear made by Palo Alto, California-based Hewlett- Packard would run a Damascus monitoring center for Syrian agents to track citizens’ communications, and route data, according to blueprints and the person familiar with the system. The Italian company running the project, Area SpA, bought the equipment through resellers in Italy, according to the documents and the person familiar with the deal.
More than 3,500 people have died in Syria’s crackdown on protesters since March. At the same time, technicians from Area were installing and testing the surveillance system, which also includes data-storage equipment from Sunnyvale, California-based NetApp Inc. (NTAP), a Nov. 4 article by Bloomberg News showed.
Area, which is based outside Milan, bought the Hewlett- Packard and NetApp gear as part of a contract with Syria’s state-owned fixed-line telephone company, according to the documents and the person familiar with the transactions.
The gear from Hewlett-Packard, the world’s largest computer maker, cost 427,911 euros ($578,000), according to Area financial records. Almost all the Hewlett-Packard equipment consists of racks of servers housed in fan-cooled cabinets, according to schematics and the person familiar with the job who has worked on the project for Area. Desktop computers comprise an additional portion.
Compliance Highest Priority
Hewlett-Packard spokeswoman Shelby Watts declined to comment specifically on Area’s surveillance system.
“HP’s policy is to comply with all U.S. export control laws and regulations,” the company said in a statement. “We do not have any employees or facilities in Syria, and our sales to parties in that country have been limited to items that are consistent with U.S. law and licensing policy on telecommunications products.”
“Compliance with U.S. and international trade laws are of the highest priority for HP,” the statement said.
The U.S. has banned most American exports to Syria other than food or medicine since 2004, and issues licenses that permit exceptions.
Hewlett-Packard spokeswoman Watts declined to address whether this particular sale had been covered by a license or comment on anything else beyond the company’s statement.
Eugene Cottilli, a spokesman for the U.S. Commerce Department, said, “We are prohibited by law from discussing specific information about export licenses.”
Project Backlash
When reviewing license applications for sales to Syria of telecommunications equipment and associated computers, the U.S. evaluates whether the export would promote the free flow of information among the Syrian people and to the outside world, he said.
U.S. Senators Mark Kirk, a Republican from Illinois, Robert Casey, a Democrat from Pennsylvania, and Christopher Coons, a Democrat from Delaware, have called for an investigation into NetApp’s role.
Amid a backlash against the project, Area Chief Executive Officer Andrea Formenti said Nov. 8 that his company is weighing options that may include exiting the deal. Area has never had any relations with Syrian intelligence agencies, and its dealings comply with all export rules, the company said.
Work on the Syria project has been suspended for more than two months, Formenti said, declining to say why. Technical problems “could be one of the reasons,” he said. The project hasn’t been completed and has never been operational, he said. Formenti didn’t respond to a request for comment for this story.
Area records show Western suppliers’ financial stake in the Syria deal.
Deep-Packet Probes
The bill for Hewlett-Packard equipment compares with 2.75 million euros for the NetApp data-storage systems, according to the records and the person familiar with the installation.
Germany’s Utimaco Safeware AG (USA) and Paris-based Qosmos SA also supplied technology for the project, according to the documents and the person familiar with the deal. European Union sanctions against Syria don’t bar such sales.
Qosmos, a maker of deep-packet inspection probes that peer into the contents of e-mails, said it had been working on the project through Utimaco and is pulling out of the deal.
Utimaco, based in Oberursel near Frankfurt, makes systems that connect tapped telecom lines to monitoring center computers. The company said in a statement on its website that it requires all its partners to adhere to German and EU export regulations and United Nations embargos.
“We are thoroughly investigating the matter and have stopped any further activities with Area until we receive full clarification from them,” Utimaco said.
‘No Intention’
Sophos Ltd., the Abingdon, England-based provider of security and data-protection software that controls Utimaco, said in a Nov. 11 statement, “We are working very closely with our team at Utimaco to understand this situation fully and see that a full investigation takes place.”
NetApp said in a statement that it condemns any unlawful shipments to Syria and has notified the U.S. government about the Bloomberg article.
“We absolutely do not support the sale of NetApp equipment to Syria,” NetApp CEO Thomas Georgens told investors on an earnings conference call Nov. 16. “I’m not here to suggest that we have found a legal way to achieve an objective to sell products to a banned country. We have no intention of doing that.”
“NetApp produces storage products; we don’t produce applications that are being talked about in this particular article,” Georgens said. “NetApp has not produced this application or participated in its development at all.”
Iran Sales
Hewlett-Packard has previously sold computers and software for use by Syrian telecommunications companies under licenses granted by the U.S. Commerce Department.
In a March 12, 2009, letter to the Securities and Exchange Commission, the company said that in the previous five years it had applied for and been granted 14 such licenses for sales that generated revenue of about $4 million.
That letter came in response to an SEC inquiry about Hewlett-Packard’s sales of printers to Iran through a Dubai- based distributor, which the Boston Globe had revealed in a December 2008 report. Hewlett-Packard said that while the sales through a non-U.S. subsidiary were legal, it had decided to end distribution in Iran.
To contact the reporter on this story: Vernon Silver in Rome at vtsilver@bloomberg.net;
To contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.net;
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