SAP’s move a business decision

GERMAN software giant SAP’s surprise move last week to voluntarily report itself to the US Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) might see the group receive a slap on the wrist in the bribery scandal engulfing the group’s South African operations.

Andrea Cornelli, the chief executive of Andrea Technology Corporate Management (TCM), said it was suspicious that SAP first denied paying kickbacks, but had now admitted that millions of rand exchanged hands when getting work from Transnet and Eskom.

SAP had not reported themselves to the DoJ for ethical reasons, but rather, it was a pure business decision, Cornelli said.

“The FCPA (Foreign Corrupt Practice Act) discounts the huge fines by 50 percent if the perpetrators self-investigate and report the violations, rather than being found by the DoJ to have violated the act,” he said.

Both the DoJ and SEC are now investigating the company for potential violations of the FCPA.

Earlier this year, reports emerged that SAP paid a 10 percent sales commission to a Gupta-controlled firm called CAD House – which specialises in selling 3D printers – to clinch the deal it secured with state rail firm Transnet.

Following the company’s investigations into the allegations – it found that more than R100 million was paid to Gupta-owned entities in order secure contracts with Transnet and Eskom. The SEC has in the past two years fined 29 companies more than $3.5 billion (R49.36bn) for contravening the FCPA.

The single largest penalty was a mammoth $957 million fine it dished out to Braskem SA, a Brazilian-based petrochemical manufacturer, for concealing millions of dollars in illicit bribes paid to Brazilian government officials to win business.

Just last week, the SEC charged mining company Rio Tinto and two former top executives with fraud for inflating the value of coal assets acquired for $3.7bn and sold a few years later for $50m.

In a statement last week, SAP said it had made its voluntary disclosure to the US authorities in July, shortly after the allegations surfaced.

In recent months, auditor KPMG fired its South African chief executive over work done for the Gupta family, consultancy McKinsey froze its work for South African state-owned companies following allegations regarding a Gupta-linked deal with Eskom, while UK public relations giant Bell Pottinger collapsed entirely after it was caught trying to organise a racially divisive campaign in South Africa at the behest of the Guptas.

This will not be the first time SAP finds itself of the SEC’s crosshairs. The group last year agreed to give up $3.7m in sales profits to settle charges that it violated the FCPA when procuring business in Panama.

At the heart of the allegations was that SAP had conjured with a bribery scheme that involved providing large discounts of up to 82 percent to SAP’s Panamanian partner, who used the excessive discounts to create a slush fund out of which to pay bribes to Panamanian officials so that SAP could sell software.

However, the company settled the matter without admitting or denying the findings.