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SEC charges Oracle with corrupt foreign practices violations
by Joseph Earnest August 16, 2012
Newscast Media WASHINGTON, D.C.—The Securities and Exchange Commission today charged Oracle Corporation with violating the Foreign Corrupt Practices Act (FCPA) by failing to prevent a subsidiary from secretly setting aside money off the company's books that was eventually used to make unauthorized payments to phony vendors in India.
The SEC alleges that 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 agreed to pay a $2 million penalty to settle the SEC's charges.
Click here to read or download the entire complaint. (pop-up)
"Through its subsidiary's use of secret cash cushions, Oracle exposed itself to the risk that these hidden funds would be put to illegal use," said Marc J. Fagel, Director of the SEC's San Francisco Regional Office. "It is important for U.S. companies to proactively establish policies and procedures to minimize the potential for payments to foreign officials or other unauthorized uses of company funds."
According to the SEC's complaint filed in U.S. District Court for the Northern District of California, the misconduct at Oracle's India subsidiary - Oracle India Private Limited occurred from 2005 to 2007. Oracle India sold software licenses and services to India's government through local distributors, and then had the distributors "park" excess funds from the sales outside Oracle India's books and records.
The SEC's complaint alleges that Oracle violated the FCPA's books and records provisions and internal controls provisions by failing to accurately record the side funds that Oracle India maintained with its distributors. Add Comments>>
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