The United States Securities and Exchange Commission (SEC) announced on September 27 that technology major Oracle has agreed to pay $23 million to resolve charges with the SEC after being accused of violating the Foreign Corrupt Practices Act (FCPA).
Oracle’s subsidiaries in India, Turkey, and the UAE are accused of creating and using slush funds – money that is incorrectly accounted for and is often used for unlawful purposes – to “bribe foreign authorities” in exchange for business between 2016 and 2019.
Oracle has been punished twice in the last decade for “improper conduct” demonstrated by its India affiliate. The company has agreed to cease and desist from violating the FCPA’s anti-bribery, books and records, and internal financial controls requirements, as well as pay about $8 million in disgorgement and a $15 million penalty, without admitting or rejecting the SEC’s allegations.
According to the SEC, an Oracle India sales employee engaged in “an excessive discount scheme” in connection with a transaction with “a transportation firm, a majority of which was controlled by the Indian Ministry of Railways” in 2019.
In January 2019, the transaction’s sales personnel indicated that without a 70% reduction on the software component, the business will be lost due to fierce competition from other original equipment manufacturers.
Because of the extent of the discount, Oracle requested approval from a French employee. The agreement, however, was accepted without asking the sales person to submit additional documentation backing, according to the SEC. “The publicly available procurement website of the Indian state-owned organisation showed that Oracle India faced no competition because it had required the use of Oracle products for the project,” the SEC stated.
The SEC also claimed that one of the sales workers engaged in the deal kept a spreadsheet indicating that $67,000 was the “buffer” available to possibly pay “a certain Indian state-owned entity official.”
A total of $330,000 was paid to an organisation having a “reputation for paying state-owned entity officials,” and another $62,000 was paid to a business controlled by the sales personnel involved in the transaction.
A request for comment was not returned by the Ministry of Railways. A message addressed to Oracle India received no response.
Oracle agreed to pay $2 million in 2012 to resolve federal civil claims of failing to prevent covert payments in its Indian sales activities, which amounted to a’scam.’ The SEC claimed at the time that Oracle violated the Foreign Corrupt Practices Act by enabling its Indian subsidiary to surreptitiously put aside funds for sham local vendors.
The SEC has previously stated that Oracle ran the possibility of the covert payments being utilised for bribery. According to the government, the infractions happened between 2005 and 2007. It claimed that the company sold software licences and services to the Indian government while keeping a portion of the revenues off Oracle’s records. Oracle has also neither acknowledged or refuted the SEC’s conclusions at the time.
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