Experts Question Value of Oracle FCPA Settlement

Amy Miller

The Recorder

08-21-2012

Oracle Corp. didn't wait for federal investigators to come calling after discovering in 2007 that a subsidiary in India was secretly stashing money to possibly bribe Indian officials.

The company voluntarily notified U.S. authorities. Now the Redwood Shores company has agreed to pay $2 million to settle Securities and Exchange Commission allegations that the subsidiary violated U.S. laws aimed at preventing bribery overseas, without admitting or denying any wrongdoing.

When announcing the settlement Thursday, the SEC said it had taken Oracle's cooperation into account, as well as its efforts to prevent the alleged bribery from happening again, such as firing the employees involved and enhancing its compliance program.

"We want companies to be vigilant and make sure there are effective internal controls," said Elena Ro, an attorney with the SEC in San Francisco who worked on the investigation. "That's an important message for us, and we want public companies to take that to heart."

Companies always debate how much they should cooperate with a government investigation. But experts say this latest SEC settlement with Oracle does little to clear up confusion about the value of voluntarily disclosing potential violations of the Foreign Corrupt Practices Act, which bars payments to foreign officials to get business.

While the penalties against Oracle were relatively modest, so was the alleged wrongdoing, said Alexandra Wrage, president of Trace International Inc., a Washington, D.C.-based nonprofit specializing in anti-bribery due diligence and compliance. The SEC's complaint didn't claim that Oracle had actually bribed anyone, just that the secret fund created a risk that the cash could be used for bribery.

"It's easy to understand why Oracle would want to put this behind it briskly and with as little expense, management distraction and reputational damage as possible," Wrage said. "But many compliance officers will be asking themselves if they would have simply fixed the problem, put more effective controls in place, and moved forward."

It's also unclear how much Oracle benefitted from its cooperation in part because there was no announcement of a parallel settlement with the U.S. Department of Justice, which is often the case, said Daniel Shallman, a white-collar defense partner at O'Melveny & Myers in Los Angeles who was not involved in the probe. The DOJ may not be doing anything, which would be the best result for Oracle, or it could still be investigating the matter. The SEC did acknowledge the DOJ's assistance in the investigation, along with Federal Bureau of Investigation the and Internal Revenue Service.

"You can't really conclude that it's over," Shallman said. "But the nature of the charge, the SEC complaint and the amount of the fine suggests to me that Oracle did get some benefit from cooperating."

But whether Oracle did get some benefit from its cooperation may be beside the point, said Michael Koehler, an assistant professor at Southern Illinois University School of Law, who's written extensively about the FCPA and other anti-corruption laws.

"I don't believe that there's any valid, legal basis to bring charges against Oracle," Koehler said. "It's simply easier and more cost-efficient to resolve an enforcement action than to engage a government agency in litigation."

One immediate side effect of the settlement, however, is clear, Wrage said. There's a lot more interest in anti-bribery compliance among companies on the West Coast now. "We've been busy," she said.

Oracle was represented in the settlement by Morgan, Lewis & Bockius partner Leslie Caldwell in New York. She declined to comment.

Oracle spokeswoman Deborah Hellinger said the company "will continue to maintain a high standard of compliance and accountability for our business around the world."

This article originally appeared in The Recorder.