German software giant SAP will pay more than $220m to settle foreign bribery charges following investigations by the SEC and DOJ, according to the SEC’s and DOJ’s press releases published yesterday.
The DOJ’s deferred prosecution agreement settles criminal charges filed in federal court in Virginia. The company was charged with conspiracy to violate the anti-bribery and books and records provisions of the FCPA relating to its scheme to pay bribes to South African officials, and conspiracy to violate the anti-bribery provisions for its scheme to pay bribes to Indonesian officials.
The SEC charged SAP with violating the FCPA’s anti-bribery, recordkeeping, and internal accounting controls provisions.
False expenses in books and records
According to the SEC, SAP violated the FCPA by paying bribes in South Africa, Malawi, Kenya, Tanzania, Ghana, Indonesia, and Azerbaijan to obtain business with public sector customers in those countries.
And, according to its order, SAP inaccurately recorded the bribes as legitimate business expenses in its books and records, despite the fact that certain of the third-party intermediaries could not show that they provided the services for which they had been contracted.
The SEC’s order also found that SAP failed to implement sufficient internal accounting controls over the third parties and lacked sufficient entity-level controls over its wholly owned subsidiaries.
“Our order that spanned seven jurisdictions and persisted for several years serves as a stark reminder of the need for global companies to maintain adequate entity-level controls over all their subsidiaries.”
Charles E Cain, Chief of the SEC Division of Enforcement’s FCPA Unit
The penalty amount came from the DOJ, as the SEC didn’t impose its own penalty. The SEC said the company’s payment will be offset by a penalty paid by the company to the South African government in connection with a parallel investigation into the same conduct. (The DOJ offered a partial offset with the fine it imposed to account for the South African penalty amount, still levying a fairly hefty one after the credit, as noted above.)
Cooperation credit
SAP received credit for its cooperation with the DOJ’s investigation, which included immediately beginning to cooperate after South African press reports made public allegations of the South Africa-related misconduct in 2017 and providing regular, prompt, and detailed updates to the department regarding factual information obtained through its own internal investigation.
The company also expeditiously produced relevant documents and other information from multiple foreign countries, voluntarily made company officers and employees available for interviews at the DOJ’s request, and took significant affirmative steps to facilitate interviews while addressing witness security concerns, among other cooperative actions.
The DOJ said the settlement reflected a 40% reduction of the US Sentencing Guidelines fine range.
In a statement issued on Wednesday, SAP said the company “has zero tolerance for those who do not adhere to the company’s compliance policies and procedures.”
“Our order holds SAP accountable for misconduct that spanned seven jurisdictions and persisted for several years and serves as a stark reminder of the need for global companies to be attuned to both the risks of their business and the need to maintain adequate entity-level controls over all their subsidiaries,” said Charles E Cain, Chief of the SEC Division of Enforcement’s FCPA Unit.
In 2016, the SEC charged SAP with books and records and internal accounting controls violations in connection with a bribery scheme in Panama. The SEC charged an SAP executive in a separate and earlier enforcement action related to these violations, as did the DOJ. The agencies citied his actions in falsifying internal approval forms and disguising his bribes as discounts in their enforcement orders.
