'Contrary to core values': Oracle reacts after SEC fine over slush funds

Indian employees of US tech giant used discount scheme in dealing with transportation firm owned by railways ministry: Regulator

Oracle will have to pay $23 million as a fine after the US Securities and Exchange Commission (SEC) pulled up the technology giant for creating slush funds that were used to bribe officials in India, the UAE, and Turkey.

“The conduct outlined by the SEC is contrary to our core values and clear policies, and if we identify such behaviour, we will take appropriate action,” Oracle’s spokesperson Michael Egbert told Business Standard in an e-mailed response.

The SEC said Oracle India's employees used “an excessive discount scheme” in connection with a transaction with a transportation company owned by the Railways Ministry.

"The SEC announced settled charges requiring Oracle Corporation to pay more than $23 million to resolve charges that it violated provisions of the Foreign Corrupt Practices Act (FCPA) when subsidiaries in Turkey, the United Arab Emirates (UAE), and India created and used slush funds to bribe foreign officials in return for business between 2016 and 2019,” said the regulator.

“In 2019, Oracle India sales employees also used an excessive discount scheme in connection with a transaction with a transportation company, a majority of which was owned by the Indian Ministry of Railways,” it further stated.

Without denying the SEC’s findings, Oracle has agreed to cease and desist from committing violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA and to pay approximately $8 million in disgorgement and a $15-million penalty. The company had maintained the same stance earlier, too.

This is the second time that Oracle has been fined for such conduct. In 2012, the company paid $2 million to the SEC to settle a previous set of FCPA violation charges. That case, too, involved the company’s action in India. According to reports, the SEC at the time alleged that the company’s India subsidiary structured transactions with foreign governments in a way that enabled them to hold about $2.2 million of the proceeds in funds used for unauthorised purposes.

US IT services giant Cognizant, too, faced an SEC action in 2020 for paying about $2 million in bribes to government officials for granting permits to build its campus near Chennai. According to reports, the company settled the case by paying around $25 million in penalties and incurred a cost of $79 million for an internal investigation. 

Oracle in India

Oracle has been in India for over 25 years now and has a headcount of 45,000. It has a strong footprint in the Indian enterprise and government segment. It was among the early players in the cloud offering to both public and private players; its client base in India is 15,000. Oracle, like most of its competitors in India, works through a channel network and has 500 partners in India.

Oracle was also among US tech giants that acquired an Indian product firm early. In 2005, it acquired i-flex Solutions for $909 million. The company was later renamed Oracle Financial Services Software, and is still listed on the Indian bourses. The company’s FY22 revenue came in at Rs 5,221.4 crore and net profit at Rs 1,890 crore.

Oracle India operations are at present headed by Shailender Kumar. Previously, Kumar led the Key Accounts program, which became one of Oracle India’s most successful. He joined Oracle as part of its BEA Systems acquisition, and has held leadership positions at Quest Software, Microsoft India, and IBM India.

When the first instance of a bribe scam at the company came to light in 2012, the company had Sandeep Mathur at the helm. Mathur resigned from the company in 2014; Oracle denied the allegations that the reason for him leaving the company was bribery charges.