SEC settles with Oracle

by Michael P. Tremoglie |
Aug. 17, 2012, 2:34pm

WASHINGTON (Legal Newsline) - Computer technology giant Oracle settled charges brought by the Securities and Exchange Commission Thursday that said the company violated the Foreign Corrupt Practices Act.

It is alleged the company failed to prevent a subsidiary from creating an account off the company's books, the funds of which were used to make unauthorized payments to phony vendors in India.

The SEC alleges that certain employees of the Indian subsidiary structured transactions with India's government in a manner that permitted the Indian distributors to hold approximately $2.2 million of the proceeds in unauthorized side funds. Those employees then allegedly told distributors to make payments out of these side funds to purported local vendors, but several of these were merely fronts.

The SEC's complaint was filed in the U.S. District Court for the Northern District of California. The alleged corrupt practices by 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. They subsequently told distributors to "park" excess funds from the sales outside Oracle India's books and records.

For example, according to the SEC's complaint, Oracle India secured a $3.9 million deal with India's Ministry of Information Technology and Communications in May 2006.

Oracle India's then-sales director instructed that only $2.1 million be sent to Oracle to record as revenue on the transaction, and the distributor kept $151,000 for services rendered, the SEC says. Certain other Oracle India employees allegedly told the distributor to "park" the remaining $1.7 million for "marketing development purposes."

Two months later, those same Oracle India employees, according to the SEC, gave to the distributor eight invoices for payments to purported third-party vendors ranging from $110,000 to $396,000. None of these third parties provided any services or were included on Oracle's approved vendor list, the SEC says.

Oracle has agreed to pay $2 million to settle the SEC's charges without admitting or denying the allegations.

Deborah Hellinger, an Oracles pokeswoman, was quoted by Reuters as saying the company terminated the employees involved and that their activity violated the company's policies.

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