With no denial of SEC’s findings, Oracle agreed to pay approximately US$8 million in disgorgement and a US$15 million penalty US regulator said
New Delhi: As per Moneylife reports, Oracle Corporation paid a bribe to Railway Ministry officials of more than US$400,000 in 2019. He was bribed during the tenure of Union minister Piyush Goyal. This detail is part of a settlement negotiated by Oracle with the US Securities and Exchange Commission (SEC) for paying bribes of over US$23mn (million) to officials in three countries—India, Turkey, and the United Arab Emirates (UAE).
According to the Foreign Corrupt Practices Act, it is illegal for US companies to bribe abroad companies. With the settlement charges option, this does not look like a barrier anymore. In 2019, it was Cognizant Technology Solutions Corporation bribed for its projects in Pune and Chennai with Larsen & Toubro acting as a facilitator.
In Oracle’s case, an order was issued on September 22. The SEC says, “One of the sales employees involved in the transaction maintained a spreadsheet that indicated US$67,000 was the ‘buffer’ available to potentially make payments to a specific Indian SOE official. A total of approximately US$330,000 was funneled to an entity with a reputation for paying SOE officials and another US$62,000 was paid to an entity controlled by the sales employees responsible for the transaction.”
Indian SOE is a transportation company. This company is owned by the ministry of railways.
As per SEC, Oracle India sales employees also used an excessive discount scheme in connection with a transaction with the Indian SOE, in 2019. “In January 2019, the sales employees working on the deal, citing intense competition from other original equipment manufacturers, claimed the deal would be lost without a 70% discount on the software component of the deal. Due to the size of the discount, Oracle required an employee based in France to approve the request. The Oracle designee provided approval for the discount without requiring the sales employee to provide further documentary support for the request. In fact, the Indian SOE’s publicly available procurement website indicated that Oracle India faced no competition because it had mandated the use of Oracle products for the project,” the order says.
Oracle violated the FCPA provisions “when subsidiaries in Turkey, the UAE, and India created and used slush funds to bribe foreign officials in return for business between 2016 and 2019,” said US SEC.
Oracle was previously sanctioned by the SEC for the creation of slush funds.
According to the SEC, Oracle settled charges in 2012 relating to the creation of millions of dollars of “side funds by Oracle India, which created the risk that those funds could be used for illicit purposes.”
According to the US regulator, employees of Oracle working in India, Turkey, and the UAE used discount schemes and sham marketing reimbursement payments to finance slush funds held at Oracle’s channel partners in those markets. This was done by them from 2014 to 2019. “The slush funds were used both to bribe foreign officials and/or provide other benefits such as paying for foreign officials to attend technology conferences around the world in violation of Oracle’s internal policies.”
SEC conducted an investigation with the assistance of SEBI, the Capital Markets Board of Turkey, and the Emirates Securities and Commodities Authority.
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“The creation of off-book slush funds inherently gives rise to the risk those funds will be used improperly, which is exactly what happened here at Oracle’s Turkey, UAE, and India subsidiaries,” said Charles Cain, the SEC’s FCPA unit chief.
“This matter highlights the critical need for effective internal accounting controls throughout the entirety of a company’s operations,” he added.
According to the order, employees of the Turkey subsidiary used these funds to accompany officials’ families to international conferences or to take side trips to California in some cases.
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