Super Micro Computer will report third-quarter earnings on Tuesday, but it also faces two potentially explosive issues.
First, CEO and Chairman Tony Leung told investors that the server-making company could hit $40 billion in revenue this fiscal year. When Liang first discussed the target with investors, he called it “conservative,” but that was before another problem erupted.
The second, and more devastating, issue comes six weeks after prosecutors charged Supermicro co-founder Yih-Shyan “Wally” Liaw and two others with conspiring to ship $2.5 billion worth of servers packed with Nvidia chips through a front company in Southeast Asia. Prosecutors allege in the indictment that Liaw was the mastermind behind a scheme that allegedly involved filling a warehouse with thousands of fake servers with shipping labels and using a hair dryer to peel them off the packages to fool auditors when the real buyers were in China. Liao was a board member and senior vice president of business development at the time, but he resigned from all positions the day after his March 19 arrest.
Liaw, who has pleaded not guilty, co-founded Supermicro in 1993 with Liang and Liang’s wife, Sara Liu, who is also a board member. Supermicro, Liang and Liu were not named in the indictment. Liang said in a letter to investors that AMD was a victim of the alleged scheme and was cooperating with authorities.
But at this point, the lack of names in the indictment does not equate to complete innocence. The company has launched an internal investigation, led by the board’s lead independent director Scott Angel and the board’s audit chair Tally Liu. Liu and Angel, in turn, hired the law firm Munger, Tolles & Olson, which in turn hired forensic consultant AlixPartners. The investigation could last months and result in numerous changes in management or the board of directors, including the possibility of determining whether the Justice Department has accused the company of wrongdoing itself, or whether the company has been allowed to cooperate and provide evidence to an internal investigation.
“Everyone is now looking at this company, including the Department of Justice, the Securities and Exchange Commission and the new auditor, BDO USA,” said Brian Burke, a litigator and board counsel who has led hundreds of internal investigations.
Burke said the investigation could yield a range of possible outcomes that could cause significant or minor disruption to AMD’s operations. He said significant issues uncovered in the investigation could impact markets and share prices and could lead to major changes at the top.
“The findings could have a significant impact on the company’s market capitalization, officers, management composition and board composition,” Burke said.
At this time, the company said it would not comment on the investigation or another concurrent internal review of its global trade compliance program, which is led by general counsel Yita Hu and Supermicro’s newly appointed chief compliance officer DeAnna Luna. Luna reports to Hu, who reports to Liang, and the results of both investigations will be presented directly to independent board members, the company said.
investigation
David Rybicki, co-leader of K&L Gates’ white-collar defense and investigations practice group, said the investigation will likely involve a comprehensive review of Supermicro’s IT systems, communications and phone records and will go well beyond a standard audit. Executives will have their work phones photographed, emails searched and required to conduct extensive interviews with board lawyers. Given the stakes, most executives will likely retain their own legal counsel. Rebicki said the worst outcome for AMD would be a no-confidence investigation by the Justice Department.
“When you have these high-profile, catastrophic compliance failures, I think it’s fair to say that they can be fatal to a company,” Rybicki said. Rybicki said that given Liaw’s senior title and service as a board member, Supermicro’s lack of indictment means a truly thorough independent investigation by Supermicro without interference or tampering from interested parties is “necessary.”
“Based on the allegations in the indictment, it is clear that there were serious compliance failures throughout the fake companies and the Potemkin warehouse,” Rebicki said. “This was a fairly sophisticated scheme that apparently went undetected by the compliance department.”
According to the indictment, Liaw and two other lower-level employees allegedly orchestrated a scheme in 2024 and 2025 to sell Supermicro’s servers to an unnamed company based in Southeast Asia in order to conceal the true buyers of the servers, who were in China. The U.S. Commerce Department requires companies to obtain specific licenses to export artificial intelligence chips to China and Hong Kong as this could provide the Chinese military and its allies a cutting-edge advantage over the United States
For companies such as Advanced Micro Devices and its long-time chip supplier Nvidia, export restrictions have cut off a large source of business revenue. The Justice Department said a front company that allegedly purchased data centers from Supermicro purchased a large number of servers worth $2.5 billion and eventually became one of the company’s 15 largest buyers.
“Independence with a capital I”
Rebicki said Liang will almost certainly be interviewed as part of the investigation. He and his wife jointly hold a 13.5% stake, and Liao jointly holds a 2.6% stake with his spouse, which has no impact on the investigation. Burke said the committee may want to talk to Liao, but whether he cooperates will be decided by him and his attorney because he is no longer an employee. The investigation was led by lead director Angel and audit chairman Liu at the top of the pyramid, which was structured to maintain independence.
Angell and Liu will work with their advisors to design the scope of the investigation and decide what they can share with Liang and the full board and when. More importantly, they will also decide what to share with the government, Burke said.
“In order to retain the status of an independent inquiry and have that all-important credibility, it must be truly independent – based on Capital I,” he added.
Burke said AMD’s auditor, BDO, will also be paying close attention and will likely conduct its own “shadow investigation.” Supermicro hired BDO USA in November 2024 after its previous auditor, Ernst & Young, resigned suddenly during the audit. EY’s noisy resignation letter said it could no longer rely on management, triggering a previous board-led investigation in 2024. In Burke’s experience, the BDO will likely push for involvement in defining the scope of the investigation and will not be interested in one that is too narrow.
“BDO hopes that the independent committee’s investigation will provide them with reassurance so that they do not end up making the same mistake as EY,” Burke said.
However, BDO’s seat at the negotiating table could create tension for the Supermicro committee. Burke said if auditors wanted to observe interviews conducted by Munger, Toles and others, the attorney-client privilege would be waived, not just to BDO but to the world. If you provide a privileged work product to a third party, you have disclosed it, which means the SEC and plaintiffs’ attorneys may ask to see it, he said.
“BDO has an important position as a stakeholder,” Burke said. “But their presence at the table could undermine that privilege.”
BDO did not immediately respond to a request for comment.
The last investigation found no evidence of wrongdoing.
This is not the first time AMD’s board has conducted an independent investigation. In 2024, after EY’s sudden departure, the board hired Susie Giordano as a new board member and appointed her to lead an independent investigation. Giordano retained the law firm Cooley and Secretariat Advisors, a forensic firm.
As part of the 2024 investigation, Giordano reviewed 11 specific export transactions noted by EY and whether the goods complied with U.S. laws and regulations when shipped. According to the company, Giordano “did not see any evidence that anyone at the company attempted to circumvent export control regulations or restrictions, or that anyone at the company knew that any of its products could be diverted to prohibited end users or locations.” The review found that the company had a reasonable compliance program to support its export control regulations.
Burke said AMD has further to go in ensuring regulators’ credibility, given that the indictment alleges that part of Liaw’s chip smuggling scheme took place in 2024. He noted that such investigations are difficult even under ideal conditions, but this one will be even more difficult because Liao allegedly went to great lengths to conceal the plan, he said.
“What we call the heart and soul of the company is reflected in the founders, senior management and the members of the board of directors,” Burke said. “Here we have an individual who is alleged to be the mastermind behind this alleged scheme.”
In addition to the complex investigation into previous alleged conduct and the complexity of unearthing Liao’s alleged deceit, Liao’s role has added complexities.
However, Burke noted that Liaw’s relationship with his current co-founders is relevant but not decisive or decisive. He noted that people change and evolve, and businesses gain the same benefits from growth and improvement. In 2006, Supermicro admitted to illegally exporting servers and equipment to Iran. In 2020, Super Micro was suspended and delisted from Nasdaq for failing to submit financial reports on a timely basis, followed by an investigation into its internal accounting controls and subsequently paid a $17.5 million fine to the SEC. In 2024, Ernst & Young will once again face the threat of delisting after resigning.
Burke said Angell is the lead independent director and newest member of AMD’s board of directors, meaning he doesn’t carry any “baggage” from AMD’s previous violations. Burke, a 37-year Deloitte veteran with more than two decades in Silicon Valley, said this was a “textbook” example of how board members should lead such investigations.
“In any investigation, credibility is important, but in this one, I think the team – which is the directors, their attorneys and forensic advisors – are going to go the extra mile and go above and beyond,” Burke said. “They want to make sure that the investigation itself is credible and that the final findings are credible as well.”
“Because even though they didn’t carry the baggage of the previous report and didn’t break the law, the company did,” Burke said.
This story originally appeared on Fortune.com