Oracle Bribed Indian Officials To Get Business? Pays Rs 180 Cr To Settle Bribery Allegations Across India, UAE, Turkey

The US’ Securities and Exchange Commission has fined Oracle $23 million to settle bribery charges.

In brief

It was found in violation of provisions of the Foreign Corrupt Practices Act (FCPA).

The firm’s India, Turkey and UAE units used slush funds to bribe foreign officials in return for business between 2016 and 2019.

Slush funds refers to a reserve of money used for illicit purposes.

Turkey, UAE units

Oracle subsidiaries in Turkey and UAE also used the slush funds to pay for foreign officials to attend technology conferences in violation of Oracle policies and procedures.

In some instances, employees of the Turkey subsidiary used these funds for the officials’ families to accompany them on international conferences or take side trips to California.

Charles Cain, chief of SEC’s FCPA unit noted that the very creation of an off-book slush fund has the risk of being used improperly, which is exactly what happened with three of Oracle’s units.

 “This matter highlights the critical need for effective internal accounting controls throughout the entirety of a company’s operations”, he said.

India unit

In the India unit, Oracle’s employees used “an excessive discount scheme” in connection with a transaction with a transportation company owned by the railway ministry.

This happened in 2019.

The employees cited competition from other original equipment manufacturers and allegedly claimed the deal would be lost without a 70 per cent discount on the software component of the deal.

 Oracle required an employee based in France to approve the request, as the discount was huge.

The discount approval was allegedly provided without getting documentary support.

Since the discount was provided to a state-owned enterprise (SOE), its procurement website indicated that “Oracle India faced no competition because it had mandated the use of Oracle products for the project”.

Buffer created to bribe officials

One of the employees had maintained a spreadsheet that indicated $67,000 was the “buffer” available to potentially make payments to a specific Indian SOE official.

It was found that approximately $330,000 was funneled to an entity with a reputation for paying state-owned entities or SOE officials.

Another $62,000 was paid to an entity controlled by the sales employees responsible for the transaction.

Oracle has neither admitted nor denied the claims.

Agreed to pay penalties

It has “agreed to cease and desist from committing violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA,” according to the SEC.

It has agreed to pay approximately $8 million in disgorgement (repayment of funds received through illegal or unethical means)and a $15 million penalty.

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.” 

Previous sanction against India unit

The SEC previously sanctioned Oracle in connection with the creation of slush funds.

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’.

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 phony local vendors.

The agency said the violations occurred from 2005 to 2007.

SEC said the subsidiary sold software licences and services to the Indian government and kept some of the sale proceeds off Oracle’s books.