Oracle Fined $23 mn for Bribing Railways Officials in 2019

Oracle Corporation has agreed to pay a $23-million fine imposed by United States (US) markets regulator Securities and Exchange Commission (SEC) for “creating slush funds” and “bribing” officials in India, Turkey and the United Arab Emirates (UAE) in return for business between 2016 and 2019 and violating the Foreign Corrupt Practices Act (FCPA).

This is the second time the tech giant has been charged for creating slush funds. “In 2012, Oracle resolved charges relating to the creation of millions of dollars of side funds by Oracle India,” the SEC order reads. Oracle had agreed to pay a $2-million penalty for failing to prevent Oracle India from keeping unauthorised side funds in relation to contracts with the information technology ministry from 2005 to 2007.

According to the SEC, Oracle India sales employees citing intense competition from other original equipment manufacturers offered a massive 70% discount on the software component of a deal with a transportation company majorly owned by the Railways ministry in January 2019, Fortune India reported.

However, the ministry’s procurement website indicated that “Oracle India faced no competition because it had mandated the use of Oracle products for the project”.

Under the headline ‘Improper Conduct at Oracle India’ on page six of the order, the SEC states: “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.”

An Oracle sales employees involved in the deal “maintained a spreadsheet that indicated $67,000 was the buffer available to potentially make payments” to a specific Indian official, as per the SEC order.

The US markets regulator found that Oracle India funnelled around $330,000 to an entity with a reputation for paying Indian officials and paid another $62,000 to an entity controlled by the sales employees responsible for the deal.

“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 and to pay approximately $8 million in disgorgement and a $15 million penalty,” the SEC said.

Oracle corporate communications vice-president Michael Egbert said that 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, CNBC reported.

The SEC’s FCPA unit chief Charles Cain said that 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”.

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

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. 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.