A&O Shearman FCPA Digest | SEC v. Oracle Corporation (N.D. Cal. 2012)

Source Documents

Nature of Business
Oracle Corporation is a publicly traded computer technology corporation registered in Delaware and headquartered in California. Oracle develops enterprise software and provides computer hardware products and services to its customers. Its shares are registered pursuant to Section 12(b) of the Exchange Act and are listed on the NASDAQ National Market.

Influence to be Obtained
According to the SEC’s complaint, employees at Oracle’s wholly owned subsidiary, Oracle India Private Limited, secreted proceeds from its sales to the Indian government for potential future use as bribe money or for embezzlement. A $2.2 million “side fund” was allegedly a source of money from which Oracle India intended to make unauthorized payments to third parties. At the direction of the Oracle India employees, the distributors then made payments out of the withheld funds to third parties, purportedly for marketing and development expenses. The SEC further alleged that the Oracle India’s employees concealed the $2.2 million from Oracle, and, therefore, that Oracle failed to properly report the $2.2 million as a prepaid marketing expense, an asset item in its books and records.

Finally, the SEC alleged that Oracle lacked the proper controls to prevent its employees at Oracle India from creating and misusing the withheld funds. According the complaint, Oracle failed to audit the distributor’s margin against the end user price to ensure excess margins were not being built into the pricing structure. According to the SEC, Oracle also failed to seek transparency in or audit third-party payments made by distributors on Oracle India’s behalf.

Enforcement
On August 27, 2012, Oracle consented to a final judgment without admitting or denying the SEC’s allegations, under which it was ordered to pay a civil penalty of $2 million and was permanently restrained and enjoined from violating the FCPA.