Oracle Corporation paid a bribe of more than US$400,000 to officials from a company owned by the Indian ministry of railways in 2019, during the tenure of Union minister Piyush Goyal. This explosive detail is part of the settlement negotiated by Oracle with US Securities and Exchange Commission (SEC) for paying bribes of over US$23mn (million) to officials in three countries—India, Turkey and the United Arab Emirates (UAE).
The Foreign Corrupt Practices Act makes it illegal for US companies to pay bribes abroad. With the settlement of charges as an option, this does not seem to be a major barrier anymore. In 2019, it was Cognizant Technology Solutions Corporation which paid bribes for its projects in Pune and Chennai, with Larsen & Toubro acting as a facilitator
In the Oracle case, an order issued on 27 September 2022, the SEC says, "One of the sales employees involved in the transaction maintained a spreadsheet that indicated US$67,000 was the 'buffer' available to potentially make payments to a specific Indian SOE official. A total of approximately US$330,000 was funnelled to an entity with a reputation for paying SOE officials and another US$62,000 was paid to an entity controlled by the sales employees responsible for the transaction."
Indian SOE is a transportation company owned by the ministry of railways.
According to the SEC, in 2019, Oracle India sales employees also used an excessive discount scheme in connection with a transaction with the Indian SOE. "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 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," the order says.
The US SEC says Oracle violated provisions of the foreign corrupt practices act (FCPA) "when subsidiaries in Turkey, the UAE and India created and used slush funds to bribe foreign officials in return for business between 2016 and 2019."
The SEC previously sanctioned Oracle in connection with the creation of slush funds.
In 2012, Oracle resolved charges relating to the creation of millions of dollars of "side funds by Oracle India, which created the risk that those funds could be used for illicit purposes," the SEC says.
According to the US regulator, from at least 2014 through 2019, employees of Oracle subsidiaries based in India, Turkey and the UAE used discount schemes and sham marketing reimbursement payments to finance slush funds held at Oracle's channel partners in those markets. "The slush funds were used both to bribe foreign officials and/or provide other benefits such as paying for foreign officials to attend technology conferences around the world in violation of Oracle's internal policies."
SEC's investigation was done with assistance from the Securities and Exchange Board of India (SEBI), the Capital Markets Board of Turkey, and the Emirates Securities and Commodities Authority.
"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, the SEC's FCPA unit chief.
"This matter highlights the critical need for effective internal accounting controls throughout the entirety of a company's operations," he added.
The order found that, 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.
"Without admitting or denying the SEC's findings," Oracle agreed to "pay approximately US$8 million in disgorgement and a US$15 million penalty," says the US regulator.