Software Company to Pay More Than $200 Million to Settle FCPA Violations

The U.S. fined German software company SAP SE more than $200 million for violating the Foreign Corrupt Practices Act, saying it bribed government officials in South Africa, Malawi, Kenya, Tanzania, Ghana, Indonesia and Azerbaijan to secure business contracts. The company agreed to a nearly $100 million settlement with the SEC and faces a $118.8 million criminal penalty, along with a forfeiture, as part of a deferred prosecution agreement with DOJ.

The company hired consultants and other third-party businesses to bribe government officials from at least December 2014 through January 2022, the SEC said. SAP recorded the bribes in its internal records as “legitimate business expenses,” the commission said, but the third parties couldn’t prove they actually “provided the services for which they had been contracted.” They instead were hired to bribe officials through luxury gifts, false invoices, political contributions and payments disguised as loans.

Although SAP had compliance procedures designed to prevent FCPA violations, the SEC said the company’s subsidiaries “repeatedly violated these internal policies,” and headquarters “lacked sufficient entity-level controls” over its affiliates. The company agreed to pay the SEC nearly $98 million, although the commission will give it credit for the $59 million in penalties it owes the South African government, which also is investigating SAP for bribery.

SAP also entered into a prosecution agreement with DOJ to settle charges of conspiracy to violate the anti-bribery and books and records provisions of the FCPA. The agency will credit a portion of its penalty against amounts SAP pays to the SEC and authorities in South Africa.

In one instance in South Africa, an SAP subsidiary said it used a local technology company to help secure a $4.4 million deal with Transnet, a state-owned rail and logistics company. But that technology company didn’t “perform any actual work for SAP,” the SEC said in an enforcement order, and it didn’t “appear to have a credible IT background or experience.” The commission said after the deal closed, the technology company paid $562,215 in “loans” to a person “known to be involved in making bribe payments.”

The SEC described similar cases in other countries, including in Indonesia, where an SAP subsidiary tried to bribe officials working for eight government-owned entities, including a telecommunications agency. The commission said two SAP Indonesia account executives worked with a local company on fake training invoices to issue payments that “created slush funds to pay bribes.” The local company created shell businesses to generate the fake expenses, some of which were used for “cash payments” to government officials.

The SEC order points to WhatsApp messages between the SAP Indonesia executives and the employees of the local company, which include requests for “baggage” and “envelopes.” The SEC said both terms were “understood to be codes for bribes to government officials.” One of the SAP Indonesia executives admitted to personally making bribes.

The commission said it offered a settlement agreement to SAP because it self-reported certain violations, “promptly” took “remedial acts,” including firing the employees responsible, making improvements to its compliance controls, introducing analytics to identify high-risk transactions, expanding its ethics procedures, implementing more employee training on anti-bribery protocols and more. The company also cooperated with the SEC’s investigation, including by “timely producing key documents.”

SAP on Jan. 10 said it “welcomes the conclusion of these matters and will fully comply with the terms of the agreements.” It also said it “separated” from all responsible employees more than five years ago and “has since significantly enhanced its global compliance program and related internal controls.” The company has “zero tolerance for those who do not adhere to the company’s compliance policies and procedures,” it said.

SAP has previously come under scrutiny for violating U.S. bribery, sanctions and export control laws. The SEC in 2016 charged the company with books and records and internal accounting controls violations stemming from a bribery scheme in Panama, and SAP agreed to pay more than $8 million in fines to DOJ and the Commerce and Treasury departments in 2021 after it admitted to illegal exports and reexports of U.S.-origin software involving Iran (see 2104290069 and 2105240046).