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SEC says Oracle's India unit used slush funds to bribe officials for business in 2019

Bribery charges rock Oracle’s India unit for the second time in a decade.

September 28, 2022 / 03:32 PM IST
Representative image.

Representative image.

Tech major Oracle will pay $23 million to settle charges of violating the Foreign Corrupt Practices Act (FCPA), which included charges of bribery in its India unit, the US Securities and Exchange Commission (SEC) said.

The company will pay the amount to resolve charges that its units in India, Turkey and the United Arab Emirates (UAE) used slush funds — money that is improperly accounted for and is for illicit purposes — to bribe officials in return for business between 2016 and 2019.

According to the SEC’s order, Oracle India’s sales employees used “an excessive discount scheme” that pertained to a transaction with a transportation company, whose majority owner is the Ministry of Railways. The employees working on the deal cited competition from other OEMs and allegedly said the deal would be lost if a 70 percent discount was not provided on the software component of the deal.

This request, since it was a steep discount, had to be approved by an employee in France, but no documentary support was given for this request to be approved. However, since the company it had provided the discount to is a state-owned enterprise, the procurement website “indicated that Oracle India faced no competition because it had mandated the use of Oracle products for the project”.

As per the SEC order, one of the employees had maintained a spreadsheet that indicated that there was a buffer of $67,000 to potentially make payments to a specific Indian official part of the state-owned enterprise (SOE).

“A total of approximately $330,000 was funneled to an entity with a reputation for paying SOE officials and another $62,000 was paid to an entity controlled by the sales employees responsible for the transaction,” the order read.

The SEC order said the company’s employees used discount schemes and sham marketing reimbursement payments to finance slush funds. These funds, it said, were used to bribe foreign officials or provide benefits such as paying for these officials to attend tech conferences around the world, which was in violation of the company’s policies.

Similarly, the company’s subsidiaries in Turkey and the UAE used the slush funds to pay for foreign officials to attend tech conferences and in some cases, some of these funds were also used for officials’ families to either accompany them or to take side trips.

This is the second time Oracle has faced such a charge, with the previous instance also including the company’s India unit.

Of the total amount Oracle will pay to settle the charges, $8 million is in disgorgement and the rest $15 million is the penalty.

In the previous instance, Oracle in 2012 had resolved charges that pertained to creating a side fund of millions by the India unit, “which created the risk that those funds could be used for illicit purposes”.

Oracle has not confirmed or denied the SEC’s findings. According to an SEC statement, 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”.

“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, SEC’s FCPA Unit Chief.

In a statement, Oracle spokesperson Michael Egbert 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."
Haripriya Suresh
first published: Sep 28, 2022 12:08 am