Merlin: Forescout Channel Stuffing Allegations Are ‘Entirely False’

‘We are disappointed that our name and reputation have been unnecessarily and unfairly dragged into the legal fight between Advent and Forescout,’ cybersecurity solution provider Merlin International tells CRN.

Cybersecurity solution provider Merlin International has forcefully denied accusations of engaging in a channel stuffing scheme with Forescout days after being subpoenaed in a lawsuit.

“We are disappointed that our name and reputation have been unnecessarily and unfairly dragged into the legal fight between Advent and Forescout,” Merlin told CRN in a statement. “The false allegations about our relationship with Forescout are, we believe, meant to divert attention away from that dispute.”

Private equity firm Advent International said it received an email May 5 from a person at the encrypted email address [email protected] alleging that Forescout involved Merlin in a channel stuffing scheme during the fourth quarter of 2019. Forescout sued Advent on May 20 after the private equity firm failed to close its previously announced $1.9 billion buy of the cybersecurity vendor.

[Related: Forescout Accused Of 'Channel Stuffing' In Whistleblower Email]

Merlin said the allegations made by the whistleblower about the agreement with Forescout are “entirely false.” Forescout said Monday that the whistleblower’s claims are “without merit” and relate to “an ordinary course transaction with one of the company’s largest customers.” Forescout declined to comment further Thursday, while Advent didn’t immediately respond to a request for comment.

Advent subpoenaed Merlin in the Delaware Court of Chancery Friday, directing the Tysons, Va.-company to produce by June 24 all documents and communications concerning Forescout from Oct. 1, 2019, to present. Advent said Merlin executed an indirect reseller agreement with Forescout on Dec. 31, 2019, just five weeks before the private equity firm agreed to buy the publicly held Forescout.

Some of the materials Advent asked Merlin to turn over include: documents and communications around difficulties with installing or deploying Forescout products and services; communications between Merlin and its end customers around Forescout products and services; audits or reviews of the Forescout transactions; and investor balances and end customer purchase orders.

Merlin licensed Forescout’s software in August 2018 to the U.S. Social Security Administration (SSA) in August 2018 for a twelve-month base period with up to five one-year extensions, according to GovTribe. The subscription was renewed for a year in May 2019, meaning that it’s currently slated to expire on July 31, 2020. The total value of the contract is up to $8.1 million dollars.

Forescout’s website lists Merlin as a mid-tier “Gold Reseller” in the company’s Envision Reseller Partner Program, which means the company has built a solutions practice around Forescout knows the company’s product portfolio. Forescout works with VARs and distributors to fulfill orders and sell to mid-market customers, according to a filing with the U.S. Securities and Exchange Commission (SEC).

Merlin international was founded in 1997, employs 193 people, and services government and commercial organizations, according to the company’s LinkedIn page. The company is today led by co-founder and U.S. Navy veteran David Phelps, while former IBM Federal Sales Manager Julie Xiang serves as Merlin’s general manager, where she’s responsible for the commercial and public sector markets.

Outside of Forescout, Merlin works with pure-play cybersecurity vendors including CyberArk, Darktrace, Netskope, Okta and Swimlane, according to the company’s website. From a channel perspective, Merlin’s website indicates the company partners with some of the largest solution providers in the U.S. federal space including Booz Allen Hamilton, CACI, CDW-G, CGI, GDIT, ManTech, SAIC and Unisys.