Technology firm Oracle has agreed to pay $23 million to settle charges with the United States Securities and Exchange Commission (SEC) after it was accused of violating the Foreign Corrupt Practices Act (FCPA), the US body said on September 27.
The charge is that Oracle’s subsidiaries in India, Turkey and UAE created and used slush funds – money that is improperly accounted typically for illicit purposes – to “bribe foreign officials” in return for business between 2016 and 2019.
This is the second instance in a decade where Oracle has been fined over “improper conduct” displayed by its India subsidiary.
Without admitting or denying the SEC’s findings, Oracle has agreed to cease and desist from committing violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA and to pay approximately $8 million in disgorgement and a $15 million penalty.
What is the “improper conduct” by the tech firm in India?
The case in India
According to the SEC, in 2019, an Oracle India sales employees used “an excessive discount scheme” in connection with a transaction with “a transportation company, a majority of which was owned by the Indian Ministry of Railways”.
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 per cent 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. However, the deal was approved without requiring the sales employee to provide further documentary support for it, SEC said. “The Indian state-owned entity’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 SEC said.
The SEC also alleged that one of the sales employees involved in the transaction maintained a spreadsheet that indicated $67,000 was the “buffer” available to potentially make payments to “a specific Indian state-owned entity official”.
A total of approximately $330,000 was funnelled to an entity with “a reputation for paying state-owned entity officials” and another $62,000 was paid to an entity controlled by the sales employees responsible for the transaction.
The Ministry of Railways did not respond to a request for comment. A mail sent to Oracle India did not elicit a response either.
What was the previous instance of Oracle India being fined?
In 2012, Oracle had agreed to pay $2 million to settle federal civil charges of failing to prevent secret payments in its sales operations in India – amounting to a ‘scam’. At the time, the SEC had said that Oracle violated the Foreign Corrupt Practices Act by allowing its Indian subsidiary to secretly set aside money that went to phoney local vendors.
Oracle ran the risk of the secret funds being used for bribes,the SEC had then said. The agency said the violations occurred from 2005 to 2007. It said the subsidiary sold software licences and services to the Indian government and kept some of the sale proceeds off Oracle’s books. At the time, too, Oracle had neither confirmed or denied the SEC’s findings.