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Oracle Settles SEC Charges

Oracle Corporation on Thursday agreed to pay a $2 million civil penalty to the SEC to settle FCPA charges arising from a slush fund in India used to pay bribes.

The SEC said California-based Oracle ‘failed to prevent a subsidiary from secretly setting aside money off the company’s books that was eventually used to make unauthorized payments to phony vendors in India.’

Oracle sells enterprise solutions software. The offenses occurred from 2005 to 2007.

Oracle structured transactions with India’s government in a way that enabled its India distributors to hold $2.2 million of the proceeds in unauthorized side funds, the SEC said.

The India employees then directed the distributors to make payments from the slush fund to purported local vendors. Many were merely storefronts that didn’t provide any services to Oracle, the SEC said. Oracle’s subsidiary documented some of the payments with fake invoices.

‘Through its subsidiary’s use of secret cash cushions, Oracle exposed itself to the risk that these hidden funds would be put to illegal use,’ said Marc J. Fagel, director of the SEC’s San Francisco Regional Office. ‘It is important for U.S. companies to proactively establish policies and procedures to minimize the potential for payments to foreign officials or other unauthorized uses of company funds.’

Oracle violated the FCPA’s books and records and internal controls provisions, the SEC said. The company failed to accurately record the side funds parked with distributors. Oracle also failed to devise and maintain a system of effective internal controls that would have prevented the improper use of company funds, the SEC said.

The SEC said the settlement ‘takes into account Oracle’s voluntary disclosure of the conduct in India and its cooperation with the SEC’s investigation, as well as remedial measures taken by the company, including firing the employees involved in the misconduct and making significant enhancements to its FCPA compliance program.’

The DOJ didn’t announce any criminal charges against Oracle.

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View the SEC’s Litigation Release No. 22450 in Securities and Exchange Commission v. Oracle Corp., Civil Action No. CV-12-4310 CRB (N.D.Cal. August 16, 2012) here.

Download the SEC’s civil complaint against Oracle Corporation here.

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