US software maker Oracle on Wednesday agreed to pay $23 million to the Securities and Exchange Commission to settle charges against violation of the Foreign Corrupt Practices Act, or FCPA, between 2014 to 2019. During the period, its subsidiaries in India, UAE and Turkey created and used slush funds to bribe foreign officials.
In India, the American markets regulator alleged that Oracle paid bribes to officials of a transportation company owned by the Ministry of Railways. Oracle did not admit or deny wrongdoing in agreeing to settle.
This is not the first time that Oracle has been charged with violating the US anti-bribery law over India-related payments.
In 2012, it agreed to pay a $2 million fine to settle SEC charges concerning the creation of millions of dollars of unauthorised side funds by Oracle India from 2005 to 2007.
The Indian unit allegedly set aside money outside its books that was eventually used to make unathorised payments to phony vendors, creating a risk that those funds could be used for illicit purposes such as bribery.
Several multinationals have time and again fallen afoul of the FCPA including retail giant Walmart, medical device company Stryker, advertising group WPP, aerospace manufacturer Embraer, IT services company Cognizant, spirits companies Beam Suntory, AB InBev and Diageo, locomotive developer Wabtec and Cadbury owner Mondelez International.
Enacted in 1977 and enforced by SEC and US Department of Justice, the Foreign Corrupt Practices Act, or FCPA, prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business. It extends to US listed companies and their officers, directors, employees, stockholders, and agents including third party agents, consultants, distributors, joint-venture partners, and others.
It also contains accounting provisions that prohibit individuals and businesses from knowingly falsifying books and records or circumventing or failing to implement a system of internal controls.
Regardless of size, for a gift or other payment to violate the statute, the payer must have corrupt intent.
The FCPA resource guide states that bribes are often concealed under the guise of legitimate payments such as consulting fees, commissions, marketing expenses, scientific incentives, travel and entertainment expenses and discounts.
Kunal Gupta, an expert in white-collar crime law, tells us why Indian agencies seldom take up such cases
Kunal Gupta, Partner, Trilegal says legal standards in India differ from US. Most FCPA violations are settled, few are tested in court. Transactions involving private officials may violate FCPA not PCA.
Walmart’s $282 million payment in 2019 was one of the biggest FCPA settlements involving India-related charges.
US authorities said Walmart’s failure to operate a sufficient anti-corruption compliance program led its subsidiaries in Mexico, India, Brazil and China to hire third-party intermediaries and allow these middlemen to make improper payments to government officials to obtain store permits and licenses.
In 2019, Cognizant Technology Solutions agreed to pay $25 million to SEC to resolve allegations that it authorised a contractor to pay a $2 million bribe to a senior government official in Tamil Nadu in 2014 to secure planning permits for the construction of its 2.7 million square foot campus in Chennai.
Brazilian plane-maker Embraer’s $206 million settlement in 2016 to resolve charges of corruption in four foreign contracts is an instance where SEC action has led to investigations in India.
Approximately $5.76 million was allegedly paid to an agent in India in connection with the sale of three highly specialised military aircraft to the Indian Air Force for $208 million. The payments were falsely recorded in Embraer’s books and records as part of a consulting agreement that wasn’t legitimate.
India’s Central Bureau of Investigation is probing the bribery allegations.
Kunal Gupta of Trilegal says, elements of offence should be established under Indian law. Firms may not be obligated to report FCPA violations to Indian agencies. Settlement in US may not lead to cognizance by Indian agencies.
While Indian agencies have the option to collaborate with American authorities when such violations occur, we must remember that very few of them end up in court, even in the US. Moreover, the conduct under the scanner of US agencies may not amount to a crime under Indian law.
Since the Prevention of Corruption Act, 1988, criminalises bribery of public servants, Indian agencies would be able to pursue action if they can establish that such officials were involved and identify them. This makes legal action difficult, even though enough information is available from US agencies.
 "Is Oracle Corporation in trouble in India?")
