SAP SE (SAP), a publicly traded global software company based in Germany, will pay over $220 million to resolve investigations by the U.S. Justice Department and the Securities and Exchange Commission (SEC) into violations of the Foreign Corrupt Practices Act (FCPA).
SAP’s resolution with the department stems from schemes to pay bribes to government officials in South Africa and Indonesia. The department’s resolution is coordinated with prosecutorial authorities in South Africa, as well as with the SEC.
According to the SEC complaint, from at least December 2014 through December 2018, SAP employed third-party intermediaries and consultants in various schemes to make improper payments to government officials in order to obtain and retain business in South Africa, Greater Africa (Malawi, Kenya, Tanzania, and Ghana), and Indonesia. Additionally, an SAP Azerbaijan employee provided improper gifts to a government official in order to obtain and retain business in Azerbaijan in January 2022.
The bribes were inaccurately recorded as legitimate business expenses in SAP’s books and records. SAP failed to implement sufficient internal accounting controls over the engagement of, and payments to, third parties and lacked sufficient entity level controls over its subsidiaries in South Africa, Greater Africa, Indonesia, and Azerbaijan.
According to court documents, SAP entered into a three-year deferred prosecution agreement (DPA) with the Department of Justice in connection with a criminal information filed in the Eastern District of Virginia charging the company with two counts: conspiracy to violate the anti-bribery and books and records provisions of the FCPA relating to its scheme to pay bribes to South African officials, and conspiracy to violate the anti-bribery provision of the FCPA for its scheme to pay bribes to Indonesian officials.
Readers may recall SAP’s prior history, which include a non-prosecution agreement from 2021 with the department’s National Security Division, as well as administrative agreements with the Departments of Commerce and the Treasury relating to Iran-related export law violations, and a resolution in 2016 with the SEC concerning alleged FCPA violations in Panama
According to court documents, SAP and its co-conspirators made bribe payments and provided other things of value intended for the benefit of South African and Indonesian foreign officials, delivering money in the form of cash payments, political contributions, and wire and other electronic transfers, along with luxury goods purchased during shopping trips. Specifically, with respect to South Africa, between approximately 2013 and 2017, SAP, through certain of its agents, engaged in a scheme to bribe South African officials and to falsify SAP’s books, records, and accounts, all with the goal of obtaining improper advantages for SAP in connection with various contracts with South African departments, agencies, and instrumentalities, including the City of Johannesburg, the City of Tshwane, the Department of Water and Sanitation (a South African state-owned and state-controlled custodian of water services), and Eskom Holdings Limited (a South African state-owned and state-controlled energy company).
In addition, between approximately 2015 and 2018, SAP, through certain of its agents, engaged in a scheme to bribe Indonesian officials to obtain improper business advantages for SAP in connection with various contracts between and among SAP and Indonesian departments, agencies, and instrumentalities, including the Kementerian Kelautan dan Perikanan (the Indonesian Ministry of Maritime Affairs and Fisheries) and Balai Penyedia dan Pengelola Pembiayaan Telekomunikasi dan Informatika (an Indonesian state-owned and state-controlled Telecommunications and Information Accessibility Agency).
Pursuant to the DPA, SAP will pay a criminal penalty of $118.8 million and administrative forfeiture of $103,396,765. SAP will also continue cooperating with the department in any ongoing or future criminal investigation arising during the term of the DPA. In addition, the department will credit up to $55.1 million of the criminal penalty against amounts that SAP pays to resolve an investigation by law enforcement authorities in South Africa for related conduct. The department will credit up to the full forfeiture amount against disgorgement that SAP pays to the SEC or South African authorities.
Under Part I of the Criminal Division’s March 2023 Compensation Incentives and Clawbacks Pilot Program, SAP’s compliance obligations include a commitment to implementing criteria relating to compliance in the company’s compensation and bonus system, subject to local labor laws. Under Part II of the Pilot Program, Justice reduced the criminal penalty by $109,141 for compensation that SAP withheld from qualifying employees, which action the company defended in substantial litigation.
According to the DOJ, “The criminal penalty calculated under the U.S. Sentencing Guidelines reflects a 40% reduction off the tenth percentile above the low end of the otherwise applicable guidelines fine range.”
Justice reached this resolution with SAP based on a number of factors, including, among others, the nature and seriousness of the offense.
SAP received credit for its cooperation with the department’s investigation, which included
(i) immediately beginning to cooperate after South African investigative reports made public allegations of the South Africa-related misconduct in 2017 and providing regular, prompt, and detailed updates to the department regarding factual information obtained through its own internal investigation, which allowed the government to preserve and obtain evidence as part of its independent investigation;
(ii) expeditiously producing relevant documents and other information to the department from multiple foreign countries, while navigating foreign data privacy and related laws;
(iii) at the request of the department, voluntarily making company officers and employees available for interviews;
(iv) taking significant affirmative steps to facilitate interviews while addressing witness security concerns;
(v) raising and resolving potential deconfliction issues between SAP’s internal investigation and the investigation being conducted by the department;
(vi) promptly collecting, analyzing, and organizing voluminous information, including complex financial information, at the request of the department;
(vii) translating voluminous foreign language documents to facilitate and expedite review by the department; and
(viii) imaging the phones of relevant custodians at the beginning of SAP’s internal investigation, thus preserving relevant and highly probative business communications sent on mobile messaging applications.
SAP also engaged in timely remedial measures, including:
(i) conducting an analysis of the root causes of the underlying conduct and gap analysis, and undertaking appropriate remediation to address those root causes and enhance its compliance program;
(ii) undertaking a comprehensive risk assessment focusing on high risk areas and controls around payment processes and enhancing its regular compliance risk assessment process, including by incorporating comprehensive operational and compliance data into its risk assessments;
(iii) eliminating its third-party sales commission model globally, and prohibiting all sales commissions for public sector contracts in high-risk markets;
(iv) significantly increasing the budget, resources, and expertise devoted to compliance and restructuring its Offices of Ethics and Compliance to ensure adequate stature, independence, autonomy, and access to executive leadership;
(v) enhancing its code of conduct and policies and procedures regarding gifts, hospitality, and the use of third parties;
(vi) enhancing its reporting, investigations, and consequence management processes;
(vii) adjusting compensation incentives to align with compliance objectives and reduce corruption risk;
(viii) enhancing and expanding compliance monitoring and audit programs, planning, and resources, including developing a well-resourced team devoted to audits of third-party partners and suppliers;
(ix) expanding its data analytics capabilities to cover over 150 countries, including all high-risk countries globally; and
(x) promptly disciplining any and all employees involved in the misconduct.
In a statement, SAP media representatives said: “ SAP separated from all responsible parties more than five years ago and has since significantly enhanced its global compliance program and related internal controls. Our significant remediation efforts, combined with our full and proactive cooperation with the authorities, have led to full resolutions of these matters.
SAP has zero tolerance for those who do not adhere to the company’s compliance policies and procedures. SAP remains vigilant in maintaining the highest standards of ethics and compliance so that, together with a global network of customers, partners, suppliers, employees, and thought leaders, SAP can help the world run better and improve people’s lives. “
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