Railways ministry launches probe into Oracle India corruption case

Oracle was fined $23 million by US SEC for paying bribes to officials of railway-owned PSU

The ministry of railways has launched an investigation into allegations of technology firm Oracle’s Indian arm creating slush funds to pay bribes worth approximately $400,000 to officials of a railways public sector undertaking (PSU) in 2019.

The development comes after the US Securities and Exchange Commission (SEC) fined Oracle to the tune of $23 million for creating slush funds to bribe foreign officials in the United Arab Emirates, India, and Turkey, in violation of the Foreign Corrupt Practices Act (FCPA).

“Regarding the SEC order in the Oracle case, Indian Railways has taken cognizance and has started investigation,” the ministry said.

“This is an internal investigation by Indian Railways, currently no other enforcement agencies are involved,” a senior railways official confirmed to Business Standard. “The ministry is reaching out to Oracle and the US SEC to divulge the name of the entity involved in this case.”

The ministry of railways has 12 public sector undertakings under its aegis. Ministry officials could not confirm the name of the entity involved in the case. When contacted by the paper, official sources in the Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) told this paper, the company, “did not have any contractual association with Oracle India during the period under reference (2016-19) or after.”

In an order dated September 27, the US regulator said Oracle India's employees used "an excessive discount scheme" in connection with a transaction with a transportation company owned by the ministry of railways in 2019.

“A total of approximately $330,000 was funnelled to an entity with a reputation for paying SOE officials, and another $62,000 was paid to an entity controlled by the sales employees responsible for the transaction," a part of the SEC order read.

“The creation of off-book slush funds inherently gives rise to the risk those funds will be used improperly, which is exactly what happened here at Oracle’s Turkey, UAE, and India subsidiaries,” said Charles Cain, the SEC’s FCPA Unit Chief.

According to the SEC order, sales employees of Oracle India in January 2019 claimed that a particular deal would be lost without a 70 per cent discount on the software component of the deal. This claim was made citing intense competition. A French employee tasked with approving the request provided the sanction without requirement of documentary support over the request.

“In fact, the Indian state operated enterprise's (SOE's) publicly available procurement website indicated that Oracle India faced no competition because it had mandated the use of Oracle products for the project. One of the sales employees involved in the transaction maintained a spreadsheet that indicated $67,000 was the 'buffer' available to potentially make payments to a specific Indian SOE official,” the SEC order said.

Oracle, without admitting or denying the SEC’s findings, agreed to cease and desist from committing violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA, the SEC said.