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Hitachi-LG Data Storage Executives Head to Prison Over Price-Fixing Drives

Hitachi-LG Data Storage Execs Pay Fines and Head to Prison After Conspiring to Fix the Bidding for Contracts with HP, Dell, and Microsoft

Three Hitachi-LG Data Storage Inc. (HLDS) executives have agreed to pay fines and serve seven to eight months in a U.S. prison, after reaching a plea agreement with the U.S. Department of Justice on price fixing conspiracy charges related to optical disk drives.

Hitachi-LG Data Storage Price FixingAccording to documents from the U.S. District Court in San Francisco, Sang Hun Kim, Young Keun Park, and Sik Hur, will each pay $25,000 USD in fines and serve sentences here in the U.S., of seven to eight months at a correctional facility to be announced later. Hur will serve the longest term, with eight months, while the other two each take a seven month bid.

The three executives conspired to fix the bidding for contracts with HP, Dell, and Microsoft sometime between November 2005 and September 2009. The Hitachi Ltd. / LG Electronics Inc. joint venture sought to eliminate the competitive bidding when it came to fulfillment orders for CD-ROM, CD-RW, DVD-ROM and DVD-RW devices.

According to the court documents, Dell and HP each had different procurement events where bidders would be awarded varying amounts of optical disk drive supply depending on where their pricing ranked. HP was the first to be scammed, followed by Dell. Microsoft was the final company to fall for the HLDS scheme.

In each case, the executives conducted several meetings and conversations with other co-conspirators to discuss bidding strategies and prices of optical disk drives. They also exchanged information on sales, market share and the pricing of optical disk drives to monitor and enforce adherence to the agreements. The point of the scam was to ensure their bids were the consistently in the top tier, and that their prices were nearly uniform, thereby ensuring a tidy profit for all.

In October, HLDS, as a company, pleaded guilty and agreed to a $21.1 million fine for the price fixing scheme. HLDS also agreed to help the FBI conduct its ongoing investigation.

Prior to their plea agreement, Park, Kim, and Hur were charged with multiple violations of the Sherman Act. Each Sherman Act violation count carries a maximum fine of $1M and up to 10 years in prison. Considering how their scheme impacted the public, the three men got off easy.

The FBI says that the case is ongoing and remains open.

Steve Ragan is a security reporter and contributor for SecurityWeek. Prior to joining the journalism world in 2005, he spent 15 years as a freelance IT contractor focused on endpoint security and security training.