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August 17, 2012

Oracle to pay $2m to settle SEC charges on FCPA probe

The violations occurred between 2005 and 2007 with Oracle India Private

By CBR Staff Writer

Oracle has agreed to pay $2m to settle US Securities and Exchange Commission charges that it violated the Foreign Corrupt Practices Act (FCPA).

SEC said that Oracle failed to prevent its subsidiary, Oracle India from secretly setting aside money off the company’s books that was used to make unauthorised payments to phony vendors in India.

The regulator said that the violations occurred between 2005 and 2007 with Oracle’s India subsidiary amounted to about $2.2m.

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.

SEC San Francisco regional office director Marc Fagel said that 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.

"It is important for US companies to proactively establish policies and procedures to minimize the potential for payments to foreign officials or other unauthorized uses of company funds," Fagel said.

According to the SEC complaint, Oracle India had not clearly mentioned the payments, except for citing a particular $3.9m deal with the Union Ministry of Information and Communication in May 2006.

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As instructed by Oracle India’s then-sales director, only $2.1m was sent to Oracle as revenue on the transaction.

SEC alleged that other Oracle India employees then instructed the distributor to park $1.7m for marketing development purposes while the distributor kept $151,000 for services rendered.

The complaint said that two months later, an Oracle India employee created and provided to the distributor eight invoices for payments to purported third-party vendors ranging from $110,000 to $396,000.

SEC said the funds were set asides approximately 14 times and they concerned with eight government contracts, and the company could not properly showed them in its accounts.

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