Oracle Corp. failed to prevent its India subsidiary from setting up a special slush fund to hold $2.2 million that could be used for potential bribery or embezzlement in violation of the Foreign Corrupt Practices Act, according to a Securities and Exchange Commission complaint.
The SEC filed the civil complaint Thursday in federal court in San Francisco while Oracle simultaneously agreed to settle the charges of FCPA violation by paying a $2 million penalty, without admitting or denying the allegations.
The company also agreed to take remedial measures, including firing the employees involved in the misconduct and upgrading the company’s FCPA compliance program, the SEC stated.
According to the SEC, Oracle’s India subsidiary sold software licenses and services to India’s government through local distributors and then had those distributors “park” excess funds from the sales outside Oracle India’s books.
Oracle India secured a $3.9 million deal with India’s Ministry of Information Technology and Communications in 2006, but in the structured sale only $2.1 million was sent to Oracle as revenue, the SEC said. The distributor kept $151,000 for services and other Oracle India employees were told to park the remaining $1.7 million for “marketing development purposes,” according to the SEC.
Within two months a series of invoices were created to pay third-party vendors when in fact none of the third-party storefront parties gave any services to Oracle, nor were they on Oracle’s approved vendor list, the SEC reported.
“The third-party payments created the risk that the funds could be used for illicit purposes such as bribery or embezzlement,” the SEC stated.
Case: SEC v. Oracle Corp., No. C12-4310CRB