Government agencies and regulators will crack down on any corrupt practice in business dealings, even if it involves Indian contracts of large foreign companies, official sources said, amid praise from the US Securities and Exchange Commission (SEC) for cooperation of the Securities and Exchange Board of India (SEBI), the country’s market regulator, in investigation into the business dealings of Oracle.
Along with the recent case where the SEBI has acted promptly, the SEC has highlighted Oracle India’s suspicious dealings in 14 occasions related to eight government contracts between 2005 and 2007, apart from other companies like Walmart and a defence deal around that period.
The SEC had earlier sanctioned Oracle in 2012. The company had resolved charges relating to the creation of millions of dollars of side funds by Oracle India.
Officials said that the government is determined to act, just like it has eliminated the leakage of public money in welfare schemes. A former prime minister had estimated the extent of leakage at 85%, but in the current system of governance, the beneficiaries get 100% of their due with the help of direct benefit transfer. Officials said the government would act against corrupt practices irrespective of the nature of the organisation of persons involved.
‘ORACLE INDIA’s MISCONDUCT on 14 OCCASIONS FROM 2005 to 2007’
The SEC had said that the “misconduct” at the Indian subsidiary of the US firm occurred from 2005 to 2007, including financial irregularities involving eight government contracts in this period. “Oracle India sold software licenses and services to India’s government through local distributors, and then had the distributors “park” excess funds from the sales outside Oracle India’s books and records.”
According to the SEC, “On approximately 14 occasions related to eight different government contracts between 2005 and 2007, certain Oracle India employees created extra margins between the end user and distributor price and directed the distributors to hold the extra margin in side funds. Oracle India’s employees made these margins large enough to ensure a side fund existed to pay third parties. At the direction of the Oracle India employees, the distributor then made payments out of the side funds to third parties, purportedly for marketing and development expenses.”
Government sources said there is concern over corrupt practices in dealing with officials in Public Sector Undertakings and other entities, amid such instances in defence deals in the past and high-profile companies like Walmart coming to light. The number of cases highlighted by SEC have fallen sharply in recent years.
‘WALMART FLOUTED LAW FROM 2009-11, EMBRAES FROM 2005-09’
The US regulator had asked Walmart Inc to pay $282 million as fine for violating the Foreign Corrupt Practices Act from 2009 to 2011 in India and other countries. Walmart had allegedly paid bribes to several third-party intermediaries in India and other countries to get approvals.
The US regulator had also acted against Embraes Defence & Civil Aviation, saying that the company indulged in corrupt practices in India from 2005 to 2009, when it improperly booked large payments to an agent and concealed this relationship with the agent while trying to obtain business in India. The company had executed a $208 million contract to develop three highly specialised aircraft for the Indian Air Force.
The SEC said the company had paid a middleman in the deal. Middlemen are forbidden in defence deals, but in January 2005, Embraes entered a consulting agreement with a UK-based company, which had a relationship with the Indian consultant, it said. According to the US regulator, less than a month after conducting this agreement, on February 8, 2005, Embraes announced that it had signed an MoU with DRDO.
Embraes’s agreement with the UK Entity had expired, but the Indian agent claimed commission, according to SEC. “From February 2009 through July 2009, Embraer negotiated, and ultimately approved, a $5.76 million settlement with the Indian consultant,” it said.
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