SEC slaps USD 2-m fine on Oracle for cooking India books

US software giant Oracle, which by its own admission, has been struggling with its Indian operations of late, has been dealt another blow. Weeks after reports that Oracle might be looking to delist its Indian arm, Oracle India, from the Indian bourses, the US SEC has announced that Oracle has agreed to pay a USD 2-million civil penalty for alleged violation of the Foreign Corrupt Practices Act.

The SEC has alleged that Oracle failed to prevent Oracle India from secretly setting aside money off the company's books. The money was eventually used to make unauthorised payments to phony vendors in India. This unauthorised side-fund, the SEC claims, amounted to USD 2.2 million and existed from 2005 to 2007.

One of the examples in the SEC's complaint is that in May 2006, Oracle India secured a USD 3.9-million deal with the Indian government's ministry of information technology and communications. But as per the instructions issued by Oracle India's then-sales director, only USD 2.1 million was sent to Oracle to record as revenues on the transaction. The distributor kept USD 151,000 for services rendered.

The SEC has further alleged that certain other Oracle India employees then instructed the distributor to park the remaining USD 1.7 million for "marketing development purposes".

And two months later, one of the Oracle India employees created and provided the distributor with eight invoices for payments to purported third-party vendors, though none of them provided any services to Oracle.

Oracle Corporation has neither admitted to, nor denied these allegations and Oracle India has refused to comment on the issue.