Oracle agrees to pay $2 mn to settle allegations in India

Oracle India structured transactions with Indian govt that enabled their distributors hold $2.2 mn proceeds in unauthorised side funds

Computer technology major Oracle has agreed to pay $2 million penalty to settle charges of market regulator SEC that its Indian subsidiary failed to prevent secret payments in its business transaction with the government between 2005 and 2007.

Oracle India structured transactions with the Indian government on more than a dozen occasions in a way that enabled Oracle India's distributors to hold approximately $2.2 million of the proceeds in unauthorised side funds, the SEC alleged in its charge-sheet against Oracle.

According to the SEC's complaint filed in US District Court for the Northern District of California, the misconduct at Oracle's India subsidiary - Oracle India Private Limited - occurred between 2005 and 2007.

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.

The charge-sheet, however, makes no reference to whom these payments were made in India, either private individuals or officials, except for refereeing to a particular $3.9 million deal with the Union Ministry of Information and Communication in May 2006.

Of this $3.9 million, Oracle India sent only $2.1 million to Oracle to record as revenue on the transaction.

"As instructed by Oracle India's then-sales director, only $2.1 million was sent to Oracle to record as revenue on the transaction, and the distributor kept $151,000 for services rendered. Certain other Oracle India employees further instructed the distributor to park the remaining $1.7 million for "marketing development purposes," the complaint said.