Oracle Corp. agreed to pay $2 million to settle claims by the U.S. Securities and Exchange Commission that it violated the Foreign Corrupt Practices Act.
The software maker failed to prevent a subsidiary from secretly setting aside money off the company’s books that was eventually used to make unauthorized payments to phony vendors in India, the SEC said in a statement.
“Through its subsidiary’s use of secret cash cushions, Oracle exposed itself to the risk that these hidden funds would be put to illegal use,” Marc Fagel, Director of the SEC’s San Francisco office, said in the statement.
Employees of the subsidiary, Oracle India Private Ltd., set up transactions with India’s government in way that let distributors hold about $2.2 million in proceeds in unauthorized side funds, the SEC said. The employees then directed the distributors to make payments from the funds to purported vendors, several of which were storefronts that didn’t provide any services to Oracle, according to the statement.
Oracle’s subsidiary documented certain payments with fake invoices, the SEC said. Oracle agreed to the settlement without admitting or denying the allegations.
The practices were carried out from 2005 to 2007, according to the SEC, which cited a complaint filed in U.S. District Court for the Northern District of California.
Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, didn’t immediately respond to a request for comment.