US software maker Oracle on Wednesday agreed to pay $23 million to the Securities and Exchange Commission to settle charges of violating the Foreign Corrupt Practices Act (FCPA) between 2014 and 2019. During the period, its subsidiaries were established in India, United Arab Emirates and Turkey and used black funds to bribe foreign officials.
In India, the US Markets Authority alleged that Oracle paid bribes to officials at a transportation company owned by the Department of Railways. Oracle has not admitted or denied wrongdoing in agreeing to a settlement.
This isn’t the first time Oracle has been charged with violating US anti-corruption law regarding payments with India.
In 2012, it agreed to pay a $2 million fine to settle SEC charges related to Oracle India’s creation of millions of dollars in unauthorized collateral funds from 2005 to 2007.
The Indian entity allegedly set aside money off its books that ended up being used to make unauthorized payments to bogus sellers, posing a risk that those funds could be used for illegal purposes such as bribery.
Several multinational companies have had ongoing run-ins with the FCPA, including retail giant Walmart, medical device company Stryker, advertising group WPP, aerospace manufacturer Embraer, IT services company Cognizant, liquor companies Beam Suntory, AB InBev and Diageo, the Locomotive developer Wabtec and the owner of Cadbury Mondelez International.
The Foreign Corrupt Practices Act (FCPA), enacted in 1977 and enforced by the SEC and the U.S. Department of Justice, prohibits the payment of bribes to foreign officials to assist them in obtaining or keeping business. It extends to US listed companies and their officers, directors, employees, shareholders and agents, including third party agents, consultants, distributors, joint venture partners and others.
It also contains accounting rules that prohibit individuals and companies from knowingly falsifying books and records or from circumventing or failing to implement a system of internal controls.
Regardless of the amount, for a gift or other payment to be against the law, the payer must have corrupt intent.
The FCPA Resource Guide states that bribes are often disguised as legitimate payments such as consulting fees, commissions, marketing expenses, academic incentives, travel and entertainment expenses, and rebates.
Kunal Gupta, an expert on white collar crime, tells us why Indian authorities rarely take up such cases
According to Kunal Gupta, a partner at Trilegal, the legal norms in India differ from those in the US. Most FCPA violations are resolved, with few going to court. Transactions involving private officials may violate the FCPA, not the PCA.
Walmart’s $282 million payment in 2019 was one of the largest FCPA settlements related to India-related charges.
US authorities said Walmart’s failure to operate an adequate anti-corruption compliance program prompted its subsidiaries in Mexico, India, Brazil and China to hire third-party intermediaries and allow those intermediaries to make improper payments to government officials to obtain permits and licenses for business.
In 2019, Cognizant Technology Solutions agreed to pay SEC $25 million to resolve allegations that it had authorized a contractor to pay $2 million in bribes to a senior government official in Tamil Nadu in 2014, to obtain building permits to build its 2.7 million square foot corporate campus in Chennai.
Brazilian aircraft manufacturer Embraer’s $206 million settlement in 2016 to settle corruption allegations in four foreign contracts is a case in which the SEC’s actions have led to investigations in India.
About $5.76 million was allegedly paid to an agent in India in connection with the sale of three highly specialized military aircraft to the Indian Air Force for $208 million. The payments were incorrectly recorded in Embraer’s books and records as part of a consulting contract that was not legitimate.
India’s Central Bureau of Investigation is investigating the bribery allegations.
Trilegal’s Kunal Gupta says elements of the offense should be determined under Indian law. Firms may not be required to report violations of the FCPA to Indian authorities. Establishment in the US may not result in recognition by Indian authorities.
While Indian authorities have the ability to cooperate with American authorities on such violations, we must remember that very few of them end up in court, even in the US. In addition, conduct under the US authorities’ scanner may not constitute a crime under Indian law.
Since the Corruption Prevention Act 1988 criminalizes bribery of public officials, Indian authorities could take action if they can show that such officials were involved and identify them. This makes legal action more difficult, although there is enough information from US authorities.
