US security market watchdog Securities and Exchange Commission (SEC) has fined Oracle $23 million for violating the Foreign Corrupt Practices Act (FCPA). The firm created slush funds for bribing foreign officials in the United Arab Emirates, Turkey, and India.
Talking about the unethical activity practiced in Oracle offshore company in India, the SEC said employees used “an excessive discount scheme” concerning a transaction with a transportation company owned by the ministry of railways.
“The Securities and Exchange Commission announced settled charges requiring Oracle Corporation to pay more than $23 million to resolve charges that it violated provisions of the Foreign Corrupt Practices Act (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,” the SEC said in a statement on Tuesday.
“In 2019, Oracle India sales employees also 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,” the order said.
A Game Of Discounting & Documentation:
A para titled Improper Conduct at Oracle India in the SEC order read, “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 state operated enterpriese’s (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. 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 SOE official. 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.“
It’s Not The First Time That Oracle India’s Name Cropped Up…
It is the second episode that Oracle is facing the penalty. In 2012 Oracle cleared the charges of creating a black fund of millions by the India unit, raising the possibility of utilizing the money for illegal activities, reported Moneycontrol. The disgorgement amount was $8 million of the $23 million, and the remaining $15 million is the penalty.
“Without admitting or denying the SEC’s findings, Oracle agreed to cease and desist from committing violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA,” SEC said.
In February 2012, SEC alleged Oracle of “violating the Foreign Corrupt Practices Act (FCPA).“ Back then also, Oracle was setting aside money off the company’s books that later was used in unauthorized payments to phony vendors in India.
Slush Funds To Flush Money On Unethical Activities
According to SEC’s 2012 order, “Certain employees of the India subsidiary of the Redwood Shores, Calif.-based enterprise systems firm structured transactions with India’s government on more than a dozen occasions in a way that enabled Oracle India’s distributors to hold approximately $2.2 million of the proceeds in unauthorized side funds. Those Oracle India employees then directed the distributors to make payments out of these side funds to purported local vendors, several of which were merely storefronts that did not provide any services to Oracle. Oracle’s subsidiary documented certain payments with fake invoices.”
Oracle paid a $2 million penalty to settle the charges.