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Secret Atari DRAM Resale Operation Revealed by FBI


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#1 jmccorm OFFLINE  

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Posted Sat Jan 5, 2013 7:10 PM

Remember the DRAM shortage of the late 80s when the US government worked with the Japanese government to limit DRAM imports to help protect American semiconductor manufacturers?

Website:
http://www.atarileaks.org/

#2 kskunk OFFLINE  

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Posted Sat Jan 5, 2013 8:59 PM

Absolutely great read. Thanks! I had no idea Atari cheated like this, but I'm not surprised. After Micron duped the feds into handing over the DRAM market, they quadrupled prices. The feds helped one US industry enjoy enormous profits, by setting back the computer industry for the rest of the 80s.

I can see how that would motivate desperate behavior... But it's still hard to believe Atari would risk the entire company by breaking federal law in such a systematic way, including fraudulant accounting that the executives must have approved. Really puts Jack Tramiel's "Business is War" philosophy in perspective...

- KS

Edited by kskunk, Sat Jan 5, 2013 9:32 PM.


#3 Allan OFFLINE  

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Posted Sat Jan 5, 2013 9:11 PM

WOW!

Allan

#4 potatohead OFFLINE  

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Posted Sat Jan 5, 2013 11:15 PM

Carmel linked a book here, I think it was called something like "Home Computer Wars" which had a lot of detail on how Tramiel ran things and some of the history behind the guy. This kind of thing going on during his reign does not surprise me at all. Love him or hate him, and I kind of feel both, Tramiel was a very interesting business man. Thanks for linking this. Great read.

#5 hunmanik OFFLINE  

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Posted Sun Jan 6, 2013 2:08 PM

Outstanding work, thanks for sharing!

#6 bennybingo OFFLINE  

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Posted Sun Jan 6, 2013 2:34 PM

Talk about balls of steel!!!

#7 potatohead OFFLINE  

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Posted Sun Jan 6, 2013 2:43 PM

Tramiel had a nice, big, solid pair. That's for sure!

#8 carmel_andrews OFFLINE  

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Posted Mon Jan 7, 2013 4:15 AM

So, Can anyone just send a FoI request to any US law enforcement agencies

#9 Rybags ONLINE  

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Posted Mon Jan 7, 2013 4:37 AM

Not quite.

First up, there might be requirement that you're a citizen. Next, some documents are automatically protected and will be released after X years or in some cases never.

Then you likely have a fee which might be $50 or more per document.

UK government releases some interesting ones at times, some of the old WW2 and Cold War stuff is pretty juicy.

#10 carmel_andrews OFFLINE  

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Posted Mon Jan 7, 2013 5:54 AM

Not quite.

First up, there might be requirement that you're a citizen. Next, some documents are automatically protected and will be released after X years or in some cases never.

Then you likely have a fee which might be $50 or more per document.

UK government releases some interesting ones at times, some of the old WW2 and Cold War stuff is pretty juicy.


Crumbs, you mean you have to pay for it....whats the point (perhaps some of that stuff/info might be released under that countries 30/50 year ruleThere again i guess that's how many universities in the UK got to find out about Tommy flowers work on the collosus (via the 30 year rule),since the UK only recently initiated an FoI act/law

Edited by carmel_andrews, Mon Jan 7, 2013 5:55 AM.


#11 carmel_andrews OFFLINE  

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Posted Mon Jan 7, 2013 5:55 AM

Crumbs, you mean you have to pay for it....whats the point (perhaps some of that stuff/info might be released under that countries 30/50 year rule

There again i guess that's how many universities in the UK got to find out about Tommy flowers work on the collosus (via the 30 year rule),since the UK only recently initiated an FoI act/law

#12 Rybags ONLINE  

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Posted Mon Jan 7, 2013 6:30 AM

If all FOI requests were free, you'd have every numbnuts crusader in the country asking about stupid things like paperclip expenditure by government departments.

Re early computer stuff, it's fair to say the US stole the thunder there for a good while in the late 40s through 50s - what they (UK scientists) did in Blechley Park was years ahead of it's time and layed the foundations for others to do better things and take the credit and profit.

Edited by Rybags, Mon Jan 7, 2013 6:30 AM.


#13 carmel_andrews OFFLINE  

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Posted Mon Jan 7, 2013 6:50 AM

If all FOI requests were free, you'd have every numbnuts crusader in the country asking about stupid things like paperclip expenditure by government departments.

Re early computer stuff, it's fair to say the US stole the thunder there for a good while in the late 40s through 50s - what they (UK scientists) did in Blechley Park was years ahead of it's time and layed the foundations for others to do better things and take the credit and profit.





Not neccessarily, the particular law enforcement agency or government department could ask the person wanting this/that information (i.e the FoI request) to show any research or documentation to backing up their FoI request (i.e. any work or articles they have done/written themselves) or even better they would have to get their request sponsored by that law enfocement agency or government department (this in itself should ileviate the majority of bogus FoI requests)

Perhaps i should have said so in the first place (whoopsie daisy)

#14 Rybags ONLINE  

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Posted Mon Jan 7, 2013 6:57 AM

Another thing is - to make a request you need to at least have some overview of what info you want.

Imagine if FOI was available in 1950 - how would Joe Public know about Blechley Park? It was one of the best kept secrets of the war.

Asking the requestor to justify the question - I got doubts. The thing is it creates admin overhead, half the idea of the fee is to discourage people from spamming random requests.

#15 jmccorm OFFLINE  

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Posted Mon Jan 7, 2013 6:16 PM

This message is the "opinion piece" which is referenced on the AtariLeaks home page. The AtariLeaks page mostly contains raw and lightly massaged information about the investigation, but it doesn't pull it all together and put it into any broader story or context. That's what this message is for. If anyone is interested in more detail, read the timeline, or the FBI documents themselves.

 

Here is my take on a clear explanation of how this the DRAM smuggling case fits into the big picture of what was going on at the time. I feel more comfortable writing informally in a forum than I do making something more formal and putting it on a website. [EDIT 2017: I've gone back and unloaded all the cool stuff that I've been sitting on. I thought the community might enjoy some rich new details.]

In 1987, Jack Tramiel's turnaround of Atari had actually worked. In fact, Atari was doing well! They were flush with cash and they were confident in the company and ready to reinvest Atari's profit back into the business. Atari was primed for a resurgence and to build a new empire where they were once again a major industry player. How would they invest in the company?

 

One very well-known criticism of Atari at the time was that they had alienated many computer dealers and mass merchants in the US, and there were few places a customer could go to see and buy their products. Atari could address that to increase sales. Alternatively, Atari could also invest in a semiconductor manufacturer which, longer term, could eventually open the door to new technologies and innovative and/or low-cost product features. Atari decided that they'd address the more immediate sales channel problem by investing in a chain of retail stores. That would be Federated.

And so they bought Federated. But by February 1988, Atari realized that they were totally screwed. They paid $67 million for Federated. Their audit revealed that they needed to write off $43 million of that purchase. So once the company was on the books, it was really only worth $24 million. On top of that, it wasn't profitable. Losses were approximately $3 million a month.

 

Looking at it another way, after Atari paid $67 million for a company which they held onto for eight months, that company is now worth absolutely nothing, and on top of that, Atari now has to pay $3 million a month to continue to hold onto it. Atari was either incredibly stupid, or they were swindled and left holding the bag, or both, right?

 

WHAT KILLED THE RISE OF JACK TRAMIEL'S ATARI WHILE LEAVING THE COMPANY STILL OPEN:

 

If you have any conception of when Jack Tramiel's Atari died, it should be this, so I'll try to paint a clear picture.

 

Jack actually managed to turn Atari around and make the company profitable once again! As a smart businessman, he took his cash and reinvested those profits in order to grow the business at an even faster rate. He wanted to turn the company back into a rocket. Unfortunately, Atari paid $67 million for a company that was worth only $24 million, so $43 million in assets on the corporate balance sheet just went up in smoke. For any company, that alone would be a huge setback, but that wasn't the worst of it.

 

Atari acquired Federated with the idea of increasing Atari's quarterly profits. The plan was that even if Federated only broke even as a retailer, it would still increase the sales of Atari's existing hardware and software products. But they couldn't get Federated to break even; it was in worse shape than any at Atari had imagined. Not only did it not bring in any profits, it actually cost $36 million a year in losses just to keep the doors open! Atari paid $67 million for their financial rocket booster... and instead they accidentally purchased a worthless financial swamp pit.

 

They had to turn Federated around or get rid of it... and quickly! They ended up getting rid of it, but not before the total financial cost to the company was at least $106 million, and for that price, they had no rocket booster to show for it. This was a disastrous loss for Atari Corporation.

 

Atari missed their breakout opportunity (pardon the pun) and had to pay a huge amount of money just to return to what was their regular financial operation before the acquisition. It wasn't a mortal blow which would force Atari to close its doors, but the company was severely injured. It could continue to operate, but it blew the financial resources that it could have invested elsewhere to rocket on towards greatness.

 

An unwise investment in Federated kept Atari's management distracted, and it blocked them from spending that same money on any number of investments which would made Atari even better. In the very competitive landscape of personal computers at that time, if a manufacturer was not innovating and investing in itself, it was standing still. Any PC manufacturer that was standing still was actually losing ground to the competition.

 

Later court documents seem to suggest that Federated knew they were screwing Atari over on the deal, but going into the deal, Atari had already figured out for themselves that Federated wasn't being entirely accurate with their financial disclosures. Atari just didn't know how bad Federated's financial picture really was until they purchased the company and ran a full financial audit. Atari's case against Federated ended up creating an unexpected piece of new case law (a legal precedent that used in other cases) which essentially boils down to this:

 

"If you discovered before the purchase that I was lying to you, then you can't sue me later for misrepresentation because you actually relied upon on my lies." (Blind reliance on an adversary is inappropriate.)

 

Humorously, that same decision would later be cited as part of the Facebook vs ConnectU case regarding the Winklevoss twins and the ownership of Facebook: "Having accused Facebook and its CEO of a massive fraud, it would have been unreasonable for the [ConnectU] Founders to rely on even an affirmative representation."

 

When Atari went to recover damages directly from Federated's former CEO, they ran into another problem: the acquisition agreement said that if anyone took Federated's CEO to court, Atari had to pay for his defense... even if he was being sued by Atari itself! Undaunted, Atari went forward with a case where it could be paying for both legal teams, regardless of outcome. The result? Yet again, we go back to that acquisition agreement which indemnified the CEO of Federated of any legal or financial responsibility resulting from the acquisition.

 

Was this whole mess the failure of Atari's Chief Financial Officer? An overeager management team? Were they intentionally being screwed by the owners of failing company who wanted to cash out? I think it is a little of all of those factors and more, but I'd like to suggest that poor legal advice was probably Atari's biggest problem in all of this.

 

My suspicion is that Atari relied too heavily on Goldman Sachs (Federated's investment banker) for casual guidance on legal issues. I have to wonder if Atari allowed them to provide the legal contract for the acquisition, believing that it would contain "boilerplate" language. I don't believe that Goldman had a fiduciary duty to provide a contract that was neutral to both parties. Wherever the contract came from, it was a bad one for Atari. Only later do they realize that it contained language that protected Federated, Goldman Sachs, and others from any legal action.

 

Court documents also state that before the acquisition, two Goldman Sachs investment bankers assured Atari's Chief Financial Officer that Federated's financial statements (resulting in a $67 million price tag) were valid. Thankfully, Atari's CFO wasn't buying it. Atari proposed to extend its offer by 45 more days so it could perform a full audit on Federated, otherwise, they'd simply walk away. Federated rejected the proposal, insisting that Atari was obligated to close the deal, or Federated would almost certainly go into bankruptcy and then sue Atari for damages.

 

Remember how I singled out poor legal advice as Atari's biggest problem? This is yet another place where a good lawyer would have served them well. An Appeals judge would later point out that Atari's obligation in the acquisition agreement was conditional on Federated's representations being "true and correct in all material respects." It most clearly was not! Atari should have had an advantage in negotiating whatever it wanted.

 

They end up resolving this issue with an unusual post-acquisition adjustment mechanism that one court characterized as a daredevil "bet agreement". Once purchased, Atari's full audit determined that Federated assets were overstated by an incredible $43 million (of that original $67 million purchase price). Much of this was in old VHS tapes that were sitting on the shelves and lost their value over time.

 

An LA Times article also says that the day after the acquisition, the former CEO of Federated (now an Atari employee) delivered a check to Goldman Sachs for $1 million. While claiming that he was only honoring a pre-merger agreement with Sachs, this check was now drawn against the balance sheet of Atari Corporation! By itself this doesn't prove anything, but in context, I think it is an excellent illustration of how well Federated worked with Goldman Sacs to totally play Atari (pun unintentional).

 

The article presents yet another unrecorded financial commitment of Federated, which was "the transfer of a company-held condominium in West Los Angeles, valued at more than $800,000, to Shadoe Stevens, a radio celebrity who has represented Federated in its advertisements for $15,000 a month. The former President and the Vice President of Federated said that, in lieu of a raise sought by Stevens, they worked out a deal prior to the Atari acquisition to allow Stevens to live in the condominium and buy it from Federated at cost. No contract was ever signed, but the option was exercised following the Atari buyout."

 

I attempted to retrieve documents and exhibits from the original court case (known as 5:88-cv-20556) in the California Northern US District court (before it was sent onto the appeals court). Unfortunately, the case was too old for documents to be available in electronic format. Still, I'm tempted to pay the fee for a manual retrieval because I'd love to examine this more closely!

 

If you're looking for the point that Atari died, it would be the acquisition of Federated. Atari had been on a comeback, but their upwards trajectory had flattened. They were now treading water, trying to survive. But in a competitive landscape, just surviving means that you're losing ground. Had Atari invested their money somewhere, anywhere else but Federated, they could have continued with a great comeback story.

So, back to the timeline, Jack Tramiel sees the writing in the wall. Atari isn't going to be a rocket to the stars. They're screwed. Just a few months after the audit, he turns the business over to his sons to manage. I remember that some people blamed his sons for the fall of Atari. "Larry, Moe, and Curly", as it were. I don't know how true that is. But at that point the company was already broken. The public simply wasn't aware of it.

So, it is May of 1988, two months after Sam Tramiel took over Atari, and Atari was still in the middle of its financial crisis. FBI documents say that is when a DRAM smuggling, cleansing, and resell operation was already underway. Japanese DRAM manufacturers were tightly controlled on the price and quantity that they could sell their chips to the US. But there was no such restriction to the rest of the world. And that was the opening that made the scheme possible. One could ship chips from Japan to Taiwan, and then Taiwan to the US. As long as the import documents were on the up-and-up, it wasn't criminal, at least. It was also massively profitable!

 

Of course, you'd presume that Atari would still be open to civil liability from the Japanese semiconductor manufacturers, and they'd be politically vulnerable, and they'd absolutely piss off just about everyone on both sides of the Pacific. One defense that was explained to the FBI was that "it was only a matter of business ethics". Well, maybe. Some ethics, huh? But that was assuming that they weren't trying to hide the operation and their import documents were on the up-and-up. And apparently, they weren't always describing the contents being shipped, and they weren't always honest about the quantity of chips in a shipment. "Ooops. I forgot a zero at the end!"

 

I really want to tell the story of how I think this plan came into motion. Did it start at Atari? Did it come from the outside? I don't have solid proof, but I have some seriously tight circumstantial evidence, including one person's own words. Unfortunately, it involves bringing a person into the spotlight who is not in the FBI documents. So I'm reluctant to say anything here in the absence of counsel. But back to the question, do I think that the idea started inside of Atari? Yes. But I'm pretty certain it didn't originate with the Tramiels or Atari's Chief Financial Officer.

 

The FBI documents totally talk about the smuggling and all the cloak and dagger, which is kinda cool. You should read through the timeline on the website, or the raw FBI document itself, for some of the flavor there. Things appeared so shady that it was Atari's own employees who turned them into the FBI, fearing that they were getting pulled into some illegal operation. One employee shared their concern that Atari had a secret arrangement with... the Russians?

 

As an aside, that accusation might not be completely off-base. Atari had an outreach to Soviet countries. The AtariLeaks website references 1988 and 1990 articles which actually do point to some level of engagement between Atari and the Soviet Union. Neither of those articles alleged any improper behavior by Atari. It looks like Atari sold 8-bit PCs to Eastern Bloc countries as early as 1987, and in 1990 they were trying to reach a deal for Soviet made 256K DRAM chips for use in the ST computer line.

 

What the FBI documents don't really do is point to any real potential motive (beyond an obvious direct financial gain). Why would such a well known publicly traded company be involved in anything remotely shady as this? In my eyes, this story right here, the Federated story, is what provides the context and the motive for a DRAM smuggling operation.

 

In May of 1989, the FBI estimated that Atari had been concealing imports of 150,000 or more units per week. My understanding is that Atari was typically selling them in bulk for $15 each, with a cost of less than $5 per chip. That would result in a weekly profit of $1.5 million. If true, this would more than cover Federated's ongoing operational losses and give Atari plenty of breathing room to turn things around without raising any public suspicion.

 

The FBI was told that Atari's own Chief Financial Officer ordered a delivery of materials to Sun Microsystems. With large amounts of new money appearing "out of thin air" from the DRAM sales, Atari could afford to spend more time to try to turn Federated around and still conceal the problem on their financial statements. They wouldn't have to publicly admit failure. They wouldn't have to scare investors because the company was still meeting their numbers. But this new scrutiny from the FBI had put a damper on things. Mostly put a damper on things, one informant claims.

 

In March of 1989, Atari reached a point where either they couldn't conceal the ongoing losses any longer, or they had no confidence in their ability to turn Federated around anytime soon. They announced that they would completely write Federated off of its balance sheets (and to do so retroactively, back-dated to January 1st, 1989) and treat Federated as a discontinued operation. Effectively, the entire $67 million purchase was a loss, and after selling off Federated's assets, the store had $36 million in operational losses.

 

Also towards the middle of 1989, the FBI and US Customs made their case to the Assistant US Attorney. The Assistant US Attorney was considering charges of either wire fraud or falsification of import documents. But it was pretty clear to the government that if the charges were made public, Atari would be totally destroyed. Between the upset suppliers, upset investors, upset customers, upset regulators, and more, the scandal would crush the company from all sides. The FBI agent that was assigned to the Atari case was pulled into an unrelated undercover case. A couple of months later, the FBI documented rumors that Atari was circling the drain.

 

carmel_andrews suggested a private deal with the FBI, and while I don't personally think that they turned Jack into an informant, I have to wonder if these last three events are connected. A high profile company with a sensitive issue might engage in back-room discussions, ultimately leading to an undisclosed deal between Atari and the US Attorney's office. That certainly might explain how the FBI understood the impact of these allegations from Atari's perspective. The US Attorney's office appeared to have some hesitation in destroying one of America's most famous corporations. It is an interesting speculation, but the FBI documents provide light and spotty cover of the US Attorney's office. I don't have any evidence to support or reject that hypothesis.

 

By 1991, Atari was a shell of what it was in 1987. The Department of Justice decided not to pursue the case. They left the case with the US Customs Department, but my FOIA request for documents only covered the FBI. We lose the story at that point, but presumably, it didn't go much further.

 

At the moment where financial reinvestment in Tramiel's new Atari was expected to help the company thrive, by misfortune, incompetence, or outright fraud, Atari landed itself in serious financial peril. Evidence suggests that they took an incredible risk to conceal the bleeding and to prevent it from becoming a mortal blow. They accomplished that much, but no more. In the end, Atari's ticket to greater fortune was taken away, but at least the company continued to survive... in an industry where you must keep moving forward or you slowly die. Even that survival was bittersweet, because it came with a terrible cost: a secret operation that had the power to destroy the company if it became publicly known at the time.

 

-- Edited on December 22nd-25th, 2017 to correct a few minor errors and to add rich new details and insights.


Edited by jmccorm, Mon Dec 25, 2017 9:59 PM.


#16 potatohead OFFLINE  

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Posted Mon Jan 7, 2013 7:57 PM

wow. i think tramiel had balls, but not in this context ..great story

#17 carmel_andrews OFFLINE  

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Posted Tue Jan 8, 2013 6:31 AM

Another thing is - to make a request you need to at least have some overview of what info you want.

Imagine if FOI was available in 1950 - how would Joe Public know about Blechley Park? It was one of the best kept secrets of the war.

Asking the requestor to justify the question - I got doubts. The thing is it creates admin overhead, half the idea of the fee is to discourage people from spamming random requests.






I found out that most of these FOI requests come from researchers and Journalist types anyway, so the chances of a member of joe public wanting to put in for an FOI is very remote

Or is it that these researchers and jounalists work for (or are producing work for) those organisations that can afford to pay the request fee

#18 carmel_andrews OFFLINE  

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Posted Tue Jan 8, 2013 6:36 AM

If anyone is interested in more detail, read the timeline on the website or the FBI documents themselves. For everyone else, here is a bettery summary of the full story. I feel more comfortable writing informally in a forum than I do making something more formal and putting it on a website. See what you think?

In 1987, Jack Tramiel's turnaround of Atari had actually worked. In fact, Atari was doing well! They were flush with cash. At this point, Atari was really to begin a resurgence and to build a new empire where they were a major player once again. Their first step was to fix their retail channel. (Another idea they were pursuing about that time was to invest in a semiconductor manufacturer instead.) A well known criticism of Atari was that they had alienated computer dealers and mass merchants in the US. So Atari decided they'd address the sales channel problem by investing in a retail outlet. That would be Federated Department Stores.

And so they bought Federated. But by February 1988, Atari realized that they were totally screwed. They paid $67 million for Federated. Their audit revealed that they needed to write off $43 million of that purchase. So once the company was on the books, it was really only worth $24 million. On top of that, it wasn't profitable. Losses were approximately $3 million a month.

Later court documents seem to suggest that Federated knew they were screwing Atari over on the deal. And it led to a crazy court ruling which says, "If you know they're lying to you and you go foward, you've screwed yourself. Even if you didn't grasp the full depth of how much they were lying to you, YOU are now responsible for the damage." That same decision would poke its head up once again in the Facebook vs ConnectU case with the Winklevoss twins and the ownership of Facebook. They'd later try to sue to recover damages, and that's when they ran into another problem. The merger agreement actually indemnified the CEO of Federated! Was all of this the result of an incompetent CIO at Atari? Overeager management? Were they intentionally being screwed by the owners of failing Federated who wanted to cash out? I think it is a little of all that and more.

If you're looking for the point that Atari died, it would be the acquisition of Federated. Their upwards momentum stopped at this point, and now they were treading water. From that point forward, Atari was trying to survive. Had Atari have put their money somewhere, anywhere else but Federated, they could have seen some fantastic growth in their company.

So, back to the timeline. Jack Tramiel sees the writing in the wall. Atari isn't going to be a rocket to the stars. They're screwed. Just a few months after the audit, he turns the business over to his sons to manage. I remember that some people blamed his sons for the fall of Atari. Larry, Moe, and Curly, as it were. I don't know how true that is. But at that point the company was already broken. The public simply wasn't aware of it.

Two months after Sam Tramiel took over Atari is were the DRAM cleansing and resell operation began. Japanese DRAM manufacturers were tightly controlled on the price and quantitiy that they could sell their chips to the US. But there was no such restriction to the rest of the world. And that was the opening that made the scheme possible. One could ship chips from Japan to Taiwan, and then Taiwan to the US. As long as the import documents were on the up-and-up, it wasn't criminal, at least.

Of course, you'd presume they'd still be open to civil liability to the Japanese semiconductor manufacturers, and they'd be politically vulnerable, and they'd absolutely piss off just about everyone on both sides of the Pacific. One defense that was explained to the FBI was that "it was only a matter of business ethics". Well, maybe. Some ethics, huh? But that was assuming that they weren't trying to hide the operation and their import documents were on the up-and-up. And apparently, they weren't always describing the contents being shipped, and they weren't always honest about the quantity of chips in a shipment. "Ooops. I forgot a zero at the end!"

I really want to tell the story of how I think this plan came into motion. Did it start at Atari? Did it come from the outside? I don't have solid proof, but I have some seriously tight circumstantial evidence, including one person's own words. Unfortunately, it involves bringing a person into the spotlight who is not in the FBI documents. So I'm reluctant to say anything here in the absence of counsel. But back to the question, do I think this was Atari's idea? In a way, yes. But I'm pretty certain it didn't originate with the Tramiels or the CFO.

The FBI documents totally talk about the smuggling and all the cloak and dagger, which is kinda cool. You should read through the timeline on the website, or the raw FBI document itself, for some of the flavor there. Things appeared so shady that it was Atari's own employees who turned them into the FBI, fearing that they were getting pulled into some illegal operation. What the FBI documents don't really point to so much is motive. And I think the Federated story provides the motive. The FBI was told that Atari's own CFO ordered a delivery of materials to Sun Microsystems. With the DRAM sales, Atari could afford to spend more time to turn Federated around. They wouldn't have to publicly admit failure. They wouldn't have to scare investors because now they could meet their numbers.

Towards the middle of 1989, the FBI and US Customs made their case to the Assistant US Attorney. The Assistant US Attorney was considering charges of either wire fraud or falsification of import documents. But it was pretty clear that if that case went forward, Atari would be totally destroyed. The FBI agent that was assigned to the Atari case was pulled into an undercover case. A couple of months later, the rumors were circulating that, on its own, Atari was circling the drain.

By 1991, Atari was a shell of what it was in 1987. The Department of Justice decided not to pursue the case. They left the case with the US Customs Department, but the FOIA request only covered the FBI. We lose the story at that point, but presumably, it didn't go much further. Our new found Atari of story's demise ends with a wimper more than it does a bang.






My thinking was that Atari and the FBI as well as US authorities struck some sort of deal around the same time JT was instigating these shenanaghans (after all it was in JT and Atari's interests to), the deal was that the FBI and US authorities wouldn't reveal Atari's involvement (i.e. some sort of imdemnity from prosecution) in exchange for some help in catching people that were 'dirty dealing', so to speak (or some sort of cash payment, like handing over any profits Atari made from the Dram sale)

#19 Guitarman OFFLINE  

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Posted Tue Jan 8, 2013 11:56 PM

What an amazing read!!

#20 Savetz OFFLINE  

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Posted Tue Jul 8, 2014 10:40 PM

The AtariLeaks.org site is gone, but with Josh McCormick's permission, I have moved the site in its entirety to http://www.atariarch...org/atarileaks/

 

In addition, I'll be talking the site and what Josh discovered in the next episode of Antic: The Atari 8-Bit Podcast.

 

--Kevin



#21 Bryan OFFLINE  

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Posted Wed Jul 9, 2014 12:21 AM

It all sounds like a normal day at the office for Jack.



#22 jhd OFFLINE  

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Posted Thu Jul 10, 2014 12:41 PM

Not neccessarily, the particular law enforcement agency or government department could ask the person wanting this/that information (i.e the FoI request) to show any research or documentation to backing up their FoI request (i.e. any work or articles they have done/written themselves) or even better they would have to get their request sponsored by that law enfocement agency or government department (this in itself should ileviate the majority of bogus FoI requests)

 

Slightly O/T, but there is no such requirement in Canada. There is both Federal Law Enforcement (Royal Canadian Mounted Police) and the various Provincial/Municipal police forces -- and even smaller entities like security on public transit. All of these entities are covered by some sort of Freedom of Information (FOI) legislation.  Anyone can make an FOI request -- there is no need to establish previous research on a topic or have any kind of sponsorship.

 

That said, unless someone is requesting their own personal information, or general things like policy documents or photo radar manuals, not much is going to be released. Someone cannot, for  example, request the criminal record or arrest report of a third party. 

 

In Alberta, at least, there is discretion to release information that has been in existence for 75 years or more, but that still does not guarantee access to sensitive matters like medical or police records, 



#23 jmccorm OFFLINE  

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Posted Sun Nov 27, 2016 11:54 AM

Update. Or a non-update?

 

I put in some additional effort to tie up some of the loose ends after this story. I put in a request with the US Attorney's Office (USA), and another request with the US Customs and Border Patrol (CBP) for for shipment records. The request given to the USA was very specific and referenced the FBI case number. They said that they had no records. The request sent to the CBP was more general and asked for shipment records involving Atari during that timeframe. It also came back negative.

 

I traced the career of one secondary figure who was named in the story and asked if she wanted to help us better understand the story. She did not. Today she's an executive in a well-known company. After the request, it appears that her time at Atari has been scrubbed from the public resume that I used to locate her.

 

In the redaction process, the FBI goes through great efforts to scrub the names of their own agents. They don't always do a perfect job. The agent that was assigned to this case was a female who has, for the most part, avoided the public eye, and since retired. She could still be a possible lead, but I figured it would be an unproductive and an unwelcomed intrusion.

 

If anyone would like to pick up the story and run with it some more, you've got my blessing.



#24 jmccorm OFFLINE  

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Posted Fri Dec 22, 2017 5:29 PM

Hi!

 

For a few years now, I've regretted that this post with background information surrounding the AtariLeaks story really didn't paint a clear enough picture of what was going on and why those events were so important in Atari's history. Also, I originally claimed that the purchase of Federated is what killed Atari Corporation, yet history knows that Atari's doors remained opened for almost ten years after the event. So on the surface, that seemed like an unresolved contradiction.

 

I've gone back and added a large section which explains how Federated killed Atari's future without actually closing the company's doors. I've made a few outstanding corrections, such as Federated instead of Federated Department Stores, which is a completely different company. In fact, I've completely rewritten and augmented so much of the story in this forum that if you've gone through it one, you might want to go through it again because I think you're going to get a much better feel for the significance of what was going on, outside of the DRAM operation itself, and why it killed the company's future.

 

Thank you all for your support. I hope you all enjoy this, some for the first time, and I'm very happy that I can knock this regret off of my list. Still, if you do find any issues, please, let me know.



#25 Level42 OFFLINE  

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Posted Sat Dec 23, 2017 3:29 AM

Uhhmmm......so Jack did a little bit of grey-import on the side......wow..... and this is all brought as if it is some major crime ?

Show me ONE company who hasnt done anything against any rules in its history.....

Besides that, Atari was victim of grey import themselves too, I know for sure as I bought my 1040STFM from a shop who imported UK machines and sold them well under the officially imported ones through Atari Benelux, but Im sure much more stuff like that happened.

I mean, its interesting reading stuff for sure but the story is still thin.....and lacks proof.

Apart from this: That US -Japan deal sounds like 100% protectionism. It was probably not a deal but an offer the Japanese could not refuse because there would probably be serious countermeasures from the US if they didnt sign the deal. As mentioned the only two companies still making RAMs in the US were TI and Micron (and Microns quality was utter crap as we all have learned from our XEs).

The results were clear enough: RAM prices in the US went up, the companies still producing complete computers inside the US got hurt (I guess Apple and maybe HP or IBM still made machines there in those days) while those who manufactured in the far-east had no issues.

So, in this way the whole protectionism idea back-fired, as this situation would have made the choice for companies still producing in the US to move their production to the Far East a lot easier....

Your conclusion is that buying Federated was what brought Tramiel Atari down, but even though you mention it, you fail to see the real cause: Tramiel Atari alienated its dealers and mass merchants in the US. If they had done proper business with them, they wouldnt have gotten into the position that they needed to think up a crazy plan like getting into retail themselves.

I think its fair enough to state that Tramiel Atari did very well in Europe because of the European sub branches, like Atari UK, Atari Germany and Atari Benelux. Hadnt these been between Atari Corp. and the dealers, the same thing would have happened in Europe and Atari Corp would have vanished a lot sooner than 1992.

Edited by Level42, Sat Dec 23, 2017 3:35 AM.





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