When it comes to FCPA enforcement and expectations, DOJ has moved the goalposts. Some would argue that DOJ has been consistent all along. The truth, like most issues, lies somewhere between the extremes.
With lots of fanfare, DOJ implemented a new Corporate Enforcement Program to udnerscore its intent to examine the criminal and civil enforcement history of corporate defendants when considering an appropriate penalty. This promised aggressive approach toward “recidivists” was soon diluted with emerging concerns over the impact of large fines on corporate shareholders. As a result, DOJ tinkered with its program to emphasize individual penalties and incentives/disincentives.
Starting in late 2022 with the ABB FCPA resolution, and continuing into 2023 and now with the first FCPA case of 2024 against SAP, DOJ is reducing the impacts of its fines and penalties against recidivists with continuing emphasis on countervailing considerations such as “extraordinary cooperation,” “significant remediation” and other noteworthy citations of cooperation as justifications for granting significant discounts for corporate violators.
In the “old” FCPA enforcement days, SAP’s global and pervasive bribery conduct would have garnered a much larger financial penalty than $220 million. Indeed, I am convinced that under the old scorecard, DOJ and the SEC would have collected upwards of $500 to $600 million in total penalties. Nonetheless, DOJ and the SEC have implemented a new regime that is more forgiving for corporate violators, especially those that cooperate and remediate in accordance with their expectations and policy pronouncements.
South African Bribery
Between 2013 and 2017, SAP and 4 employees along with third-party intermediaries executed various bribery schemes in South Africa, involving the City of Johannesburg (“CoJ”), the Department of Water and Sanitation (“DWS”), the City of Tshwane (“CoT”) and Eskom Holdings (“Eskom”).
In August 2016, SAP secured a valuable software and professional services contract by paying bribes to a CoJ official. Two SAP employees confirmed in a text message that they would pay a bribe in exchange for the award of the contract. Subsequently, one of the employees arranged for payment of approximately $155k through a third-party to the CoJ’s political party bank account. The payment was recorded in the SAP’s books as a “sales commission” payment to the third-party.
In November 2016, SAP with the assistance of two employees paid a bribe through a different third-party intermediary to a DWS official to secure a software and services contract. SAP paid a bribe of $215k to a DWS official. SAP disguised the bribes by paying 2 separate third parties a 14.9 percent commission on the contract as a means to funnel the bribe to the government official.
SAP conducted limited due diligence of one of the two third parties, which revealed that the third-party did not have requisite experience in the industry or financial qualifications to satisfy SAP due diligence requirements. The 14.9 percent commission was just below the threshold required for higher-level approval by SAP.
SAP engaged three other intermediaries and charged them with seeking additional contracts by funneling high-commission payments to the intermediaries to fund bribery payments to secure such business. These payments were not supported by appropriate invoices documenting any actual work provided by the intermediary.
SAP used two other intermediaries to secure business from Eskom, South Africa’s electricity company, using the same bribery schemes.
In December 2014, SAP closed on a $4.4 million contract with Transnet, a state-owned rail and logistics company with the assistance of a third-party intermediary, a South African tech company, with a reputation for corruption. The intermediary was paid a ten percent commission anad provided no actual work. The intermediary made the bribe payments through a “loan” payment to an individual known for paying bribes. SAP used another intermediary to secure a September 2015 contract valued at $6.58 million with Transnet. SAP paid the second intermediary a $1 million commission to funnel a bribe payment to a Transnet official.
Indonesia Bribery
Between 2015 and 2018, SAP paid bribes, with the assistance of third-parties, to Indonesian government officials to secure valuable contracts.
In June 2018, an SAP employee and a Indonesian consultant coordinated bribes for multiple Indonesian officials at the Kementerian Kelautan dan Perikanan (“KKP”), the Indonesian Ministry of Maritime Affairs and Fisheries. The bribes ranged between $3600 and $5040, and were paid in cash.
In March 2018, SAP obtained multiple contracts to provide software and services to Balai Penyedia dan Pengelola Pembiayaan Telekomunikasi dan Informatika (“BP3TI”), an Indonesian state-owned and state-controlled Telecommunications and Information Accessibility Agency. An SAP employee arranged for a BP3TI official and a family member to travel to the United States, and paid for shopping trips to purchase handbags, keychains, novelties, gifts and other items. The SAP employee had a budget of $10,000 for the shopping trip over a five-day visit. The SAP employee also purchased a luxury watch for the BP3TI official. The SAP employee sent SAP colleagues pictures of the shopping trip.
SAP and Indonesia Intermediary 1 used fake training invoices to issue payments that created slush funds to pay bribes. Employees at Indonesia Intermediary 1 created shell companies to generate these false expenses. Some of the false invoices generated kickback payments to employees at the Indonesia Intermediary 1, some paid for customer excursions, and others generated cash payments to government officials at state-owned entities.
Indonesia Intermediary 1, and an SAP account executive also paid for golfing excursions for officials at PT Pertamina, a state-owned oil and natural gas corporation. The benefits were provided to obtain a January 23, 2017 contract, which included maintenance services relating to licenses valued at $13,331,423. WhatsApp chats also indicate that others at SAP Indonesia and employees at various VARs discussed requests to pay for meals and travel expenses for employees of public sector customers.
Greater Africa Bribery
SAP used resellers to conduct business throughout Greater Africa, including a Zimbabwe-based reseller (“GA Intermediary 1”) that was used to conduct business in Malawi, Tanzania, Ghana, and Kenya. GA Intermediary 1 engaged in bid-rigging and arranged corrupt payments to government officials in connection with SAP deals in all four countries between 2014 and 2018.
GA Intermediary 1 helped SAP procure tender documents to obtain a December 29, 2017 contract with the Government of Malawi valued at $1,416,878 in exchange for improper payments to Malawi government officials. GA Intermediary 1 used this access to influence the outcome of the tender in SAP’s favor.
In Tanzania, with the assistance of the same intermediary, SAP paid bribes to win a tender for a June 2015 sales contract and a subsequent June 2016 contract with the Tanzania Ports Authority (“TPA”), valued at $768,561 and $41,745, respectively. Again, SAP obtained early access to tender materials on a thumb drive and followed up with payment of additional bribes to help SAP win the tender.
SAP worked with two intermediaries to pursue a 2016 contract with the Ghana National Petroleum Corporation (“GNPC”) valued at $1,205,175. The second intermediary unqualified for the project and was retained for its political connections. Initially, GA Intermediary 1 tried to win the contract on behalf of SAP by offering to pay a company associated with a government official, “40% of the total deal value” in exchange for unspecified “support services leading to the successful award of the opportunity.” The “support services” to be performed were not legitimate, rather the payment was in return for the government official’s help ensuring that GNPC would forego the tender process and sole source the contract to GA Intermediary 1. GA Intermediary 1’s efforts ultimately failed, however, leaving GA Intermediary 2, with its political connections, to secure the deal instead.
SAP Africa again used GA Intermediary 1 to help it improperly influence a tender by the Kenya Revenue Authority in 2015. SAP violated its own internal processes and procedures regarding due diligence, and the retention of third parties when it failed to properly vet GA Intermediary 1, and ignored repeated red flags—including payment requests for vague and undefined deliverables—indicating that GA Intermediary 1 was funneling money to make improper payments.
While GA Intermediary 1 was suspended on September 12, 2018, after red flags surfaced indicating it was paying bribes to officials at the Tanzania Ports Authority and the Kenya Revenue Authority, SAP Africa allowed the reseller to start resales later in 2018 despite the continuing presence of red flags.
Azerbaijan Bribery
An SAP employee provided improper gifts to government officials in connection with a May 2022 contract with the State Oil Company of the Republic of Azerbaijan (SOCAR) valued at $1,645,703. The employee provided improper gifts in December 2021 and January 2022 to multiple SOCAR officials in an effort to close the deal. Several SOCAR officials received gifts totaling approximately $3,000, well above SAP’s gift limit of $30. The employee also prepared a fake Act of Acceptance between SOCAR and a SAP, which she submitted to the SAP contract booking team on February 4, 2022. SOCAR signed the real Act of Acceptance on May 12, 2022. Evidence indicates that the employee was attempting to claim a commission on the deal before her pending promotion to SAP Managing Director became effective, after which she would not be eligible to earn additional compensation from the sale.
