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Oracle Joins Ranks of FCPA Recidivists: Settles SEC Case for $23 Million (Part I of II)

Oracle Corporation settled its second FCPA case in ten years.  Oracle agreed to pay $23 million to resolve allegations that its subsidiaries in Turkey, India and the United Arab Emirates maintained slush funds to bribe foreign officials.  Ten years ago in 2012, Oracle paid the SEC $2 million creating millions of dollars in off-the-books accounts at its India subsidiary.

Oracle agreed to pay $8 million in disgorgement and a $15 million penalty. It is not known if DOJ has a pending investigation of Oracle’s conduct or if DOJ declined to prosecute Oracle.

Between 2009 and 2019, Oracle used both direct and indirect sales models, including the use of value-added distributors  and value-added resellers.  The indirect sales model, however, increased the risks of abuse and creation of improper slush funds.

Over a five-year period, Oracle employees based in India, Turkey and the UAE used discount schemes and sham marketing reimbursement payments to finance slush funds held at Oracle’s channel partners in those markets.  The slush funds were used to bribe foreign officials and secure other benefits for foreign officials such as paying for travel and lodging to allow them to attend technology conferences.

In reaching the settlement, the SEC took into account the fact that oracle voluntarily disclosed the misconduct, implemented remedial measures and cooperated fully with the SEC’s staff.

With respect to cooperation, Oracle shared facts discovered in the course of its internal investigation, voluntarily provided translations of key documents and facilitated the staff’s requests to interview current and former employees of Oracle’s foreign subsidiaries.

Oracle’s remediation efforts included: (i) termination of senior regional managers and other employees involved in the misconduct and separating from employees with supervisory responsibilities over the misconduct; (ii) terminated distributors and resellers involved in the misconduct; (iii) enhanced its global compliance, risk and controls functions, including the creation of over 15 new positions and teams at headquarters and globally; (iv) improved its controls over the discount approval process and the entire discounting procedures; (v) increased oversight and control of the purchase requisition approval process; (vi) limited financial incentives and business courtesies available to third parties, particularly those involving government projects; (vii) improved its customer registration and payment checking process and making other enhancements related to annual technology conferences; (viii) enhanced its proactive audit functions; (ix) introduced measures to improve the level of expertise and quality of its partner network and reduced the number of partners within its network; (x) enhanced the procedures for engaging third parties, including the due diligence processes to which partners are subjected; (xi) implemented a compliance data analytics program; and (xii) enhanced training and communications provided to employees and third parties regarding anti-corruption, internal controls and other compliance issues.

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