On August 16, 2012, in a Complaint filed in the U.S. District Court in the Northern District of California, the Securities and Exchange Commission (“SEC”) charged Oracle Corporation with violating the Foreign Corrupt Practices Act (“FCPA”). The Complaint alleges that, from 2005 to 2007, employees of an Indian subsidiary of Redwood Shores, a California-based enterprise systems firm, arranged transactions with India’s government in a way that enabled Oracle India Private Limited’s distributors to secretly “park” approximately $2.2 million of transaction proceeds in side funds. The Complaint alleges that Oracle India employees then directed its distributors to make unauthorized payments out of these side funds to local vendors, who operated merely as storefronts that did not provide any services to Oracle. It is further alleged that these payments were documented by Oracle’s subsidiary using fake invoices.
The SEC’s Complaint alleges that (1) Oracle violated the FCPA’s books and records provisions and internal controls provisions by failing to accurately record the side funds that Oracle India maintained with its distributors, and (2) Oracle failed to devise and maintain a system of effective internal controls that would have prevented the improper use of company funds. Without admitting or denying the SEC’s allegations, Oracle agreed to pay a $2 million penalty to settle the SEC’s charges.