Oracle Employees Created Slush Fund To Bribe Officials Of Indian Railways Company: SEC

Oracle Corp. created slush funds to pay bribes to officials of a publicly listed company majority owned by Indian Railways, according to an order of the U.S. market regulator.

The technology giant's Indian unit -- along with Oracle's subsidiaries in Turkey and the UAE -- created off-book slush funds to bribe foreign officials in return for business between 2016 and 2019, the US Securities and Exchange Commission said in its order. That SEC alleged violation of provisions of the Foreign Corrupt Practices Act by the subsidiaries.

Oracle has agreed to pay $23 million to settle the charges.

The SEC took assistance from the Securities and Exchange Board of India.

The SEC alleged Oracle India sales employees 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 U.S. regulator did not name the company. There are four listed companies majority owned by Indian Railways.

In January 2019, sales employees of Oracle India, citing intense competition from other original equipment manufacturers, said a deal with the said company would be lost without a 70% discount on the software component, according to the U.S. regulator's order.

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", the order said.

The U.S. regulator alleged that the Indian state-owned enterprise’s publicly available procurement website indicated 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, or around Rs 50 lakh based on then prevailing currency rates, was the “buffer” available to potentially make payments to a specific Indian public sector company official, the SEC said.

The regulator did not disclose the name of the official in the order shared on the website. A total of about $330,000 or around Rs 2.3 crore was funnelled to an entity with a reputation for paying public sector officials and another $62,000 or around Rs 43 lakh was paid to an entity controlled by the sales employees responsible for the transaction, according to the SEC order.

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.

This is the second time Oracle has been pulled up by the U.S. regulator for alleged improper practices in India. In August 2012, the company had paid $2 million penalty to settle SEC’s allegations that Oracle violated the books and records and internal accounting controls by failing to prevent its Indian arm from keeping unauthorised side funds at distributors from 2005-07.