Oracle will pay the settlement amount to the US SEC for purportedly violating the Foreign Corrupt Practices Act
Oracle refuses to admit or claim the findings and has agreed to not commit violations of norms henceforth.
This is the second instance of FCPA violation by Oracle involving slush funds emanating out of India
Technology giant Oracle has agreed to pay $23 Mn in settlement charges for allegedly bribing foreign officials, including those from India, between 2016 and 2019.
Oracle will pay the amount to the United States Securities and Exchange Commission (SEC) for purportedly violating the Foreign Corrupt Practices Act (FCPA). This is the second time that Oracle has been reprimanded for violating norms by its Indian subsidiary.
“The SEC announced settled charges requiring Oracle Corporation to pay more than $23 Mn to resolve charges that it violated provisions of the FCPA when subsidiaries in Turkey, the United Arab Emirates (UAE), and India created and used slush funds to bribe foreign officials in return for business between 2016 and 2019”, said the US agency in a statement.
Slush funds are typically off-book funds that are not properly accounted for and as such, are prone to be used improperly, including for corrupt or illegal purposes.
Interestingly, Oracle has refused to admit or claim the findings and has agreed to not commit violations of norms henceforth. A breakdown of the $23 Mn in fines revealed that the company was fined around $8 Mn in disgorgement and another $15 Mn in penalty.
Disgorgement refers to a situation whereby an organisation is forced to pay back money they have made illegally.
The India Connection
The Indian angle to the case pertains to a 2019 transaction between Oracle and a transportation company in which the Ministry of Railways owned a majority stake.
Without alluding to the name of the company, SEC noted that Oracle sales employees working on the deal allegedly claimed that the deal would be lost in the absence of a 70% discount on the software component of the deal owing to intense competition from other players.
Subsequently, the deal was sent to an Oracle employee based in France to be approved due to the large size of the discount. What purportedly happened later was that the request was approved without further documentary support from the India sales team working on the contentious transaction.
“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.
SEC also claimed that a spreadsheet maintained by one of the sales personnel indicated that a ‘buffer’ of up to $67,000 was earmarked for potential payments to a specific ‘Indian state-owned entity official.’
In total, around $330K was pumped to an entity with “a reputation for paying state-owned entity officials” and another $62K was diverted to an entity controlled by the sales employees behind the transaction.
The case is likely to emerge as a major headache for the current government which was voted to power on its anti-corruption mandate. So far, there has been no clarification from any government official or member of the government on the said development.
In a statement sent to Business Standard, an Oracle spokesperson said, “The conduct outlined by the SEC is contrary to our core values and clear policies, and if we identify such behaviour, we will take appropriate action.”
A History Of Abuse
This is not the first time that the tech giant has landed in hot waters for flouting FCPA norms and indulging in allegedly bribing corrupt officials. Back in 2012 as well, Oracle had agreed to pay $2 Mn to settle charges that included allowing its Indian subsidiary to secretly set aside money that went to non-existent local vendors.
Even then, it had neither admitted nor denied the SEC’s allegations and had consented to payment of the penalty to deal with the charges.
In the previous instance, SEC had alleged that certain employees of Oracle India’s subsidiary structured transactions with the Indian government in such a way that enabled the tech firm’s local distributors to hold nearly $2.2 Mn of unauthorised side funds.
Subsequently, Oracle Indian employees would then direct the distributors to make payments out of these side funds to purported local vendors, several of which were just storefronts and did not provide actual services to the company.
The US-based corporation is a multi-billion dollar empire that sells products from database softwares to cloud systems.
Oracle was among the first global software companies to set up a base in India. It began operations in India in partnership with Tata Consultancy Services (TCS) in 1987 and then later announced its full-fledged wholly owned subsidiary in 1993.
Its India operations are headquartered in Gurugram, with offices in multiple cities, including Bengaluru and Hyderabad. Its Indian subsidiary overlooks everything from product design to development and also caters to a whole gamut of companies, offering products from cloud services and ERPs.
Across multiple segments and products, the company competes with other multinational giants such as IBM, SAP, Microsoft, AWS and other big names.
The company reported a revenue of $42.44 Bn for the end of fiscal year ending May 2022.
