SEC and DOJ Charge Global Software Company SAP for FCPA Violations

The Securities and Exchange Commission (SEC) has announced charges against the global software company SAP for violating the Foreign Corrupt Practices Act (FCPA) in connection with bribery schemes across multiple countries. The company has agreed to pay nearly $100 million in disgorgement and prejudgment interest to settle the SEC’s charges.

The SEC's order reveals that SAP, whose American Depositary Shares are listed on the New York Stock Exchange, engaged in bribery through third-party intermediaries and consultants from December 2014 through January 2022. The illicit activities were carried out in South Africa, Malawi, Kenya, Tanzania, Ghana, Indonesia, and Azerbaijan. SAP used these intermediaries to pay bribes to government officials in order to secure business with public sector customers in the mentioned countries.

According to the SEC, SAP inaccurately recorded these bribes as legitimate business expenses in its books and records. Some of the third-party intermediaries failed to demonstrate that they provided the services for which they were contracted. The SEC's order also notes that SAP lacked sufficient internal accounting controls over the third parties and lacked adequate entity-level controls over its wholly-owned subsidiaries.

Charles E. Cain, Chief of the SEC Division of Enforcement’s FCPA Unit, emphasized the global scale of the misconduct, spanning seven jurisdictions over several years. The order holds SAP accountable for its actions and underscores the importance for global companies to be vigilant about business risks and to maintain adequate controls over all subsidiaries.

In 2016, the SEC had previously charged SAP with books and records and internal accounting controls violations related to a bribery scheme in Panama.

As part of the settlement, SAP has consented to the SEC’s order, acknowledging the violations of the anti-bribery, recordkeeping, and internal accounting controls provisions of the Securities Exchange Act of 1934. SAP will pay disgorgement of $85 million plus prejudgment interest of more than $13.4 million, totaling more than $98 million. This amount will be offset by up to $59 million, which SAP will pay to the South African government as part of parallel investigations into the same conduct.

This SEC action is part of a coordinated global settlement that involves the United States Department of Justice (DOJ) and criminal and civil authorities in South Africa.

Simultaneously, the DOJ has announced that SAP will ultimately pay over $220 million to resolve investigations into FCPA violations. SAP entered into a three-year deferred prosecution agreement (DPA) with the DOJ, admitting to criminal information filed in the Eastern District of Virginia.

The DOJ's resolution is connected to bribery schemes in South Africa and Indonesia. SAP made bribe payments and provided other benefits to officials in these countries, utilizing methods such as cash payments, political contributions, and electronic transfers. SAP's actions aimed to secure valuable government business in South Africa and obtain improper advantages in Indonesia.

SAP's compliance obligations under the DPA include implementing criteria related to compliance in the company’s compensation and bonus system. The company will pay a criminal penalty of $118.8 million and administrative forfeiture of $103,396,765. SAP will continue cooperating with the DOJ in any ongoing or future criminal investigation during the term of the DPA.

This resolution with SAP demonstrates the importance of international cooperation in combating corruption. The case highlights the power of coordinated efforts between the U.S. authorities and South African law enforcement in identifying and prosecuting corrupt activities. SAP's acceptance of responsibility and implementation of remedial measures are crucial steps in addressing the misconduct and fostering ethical business practices.

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