SAP to pay $220M in FCPA settlements

SAP entered into a three-year deferred prosecution agreement, was assessed a criminal penalty of nearly $119 million by the Department of Justice (DOJ), and agreed to pay forfeiture of more than $103 million, the agency announced Wednesday. Portions of those amounts will be credited in line with parallel resolutions with the Securities and Exchange Commission (SEC), which announced nearly $100 million to be paid in disgorgement and prejudgment interest, and South African authorities.

The FCPA settlement between SAP and the DOJ marks the second for the agency coordinated with South African authorities, after Swiss technology company ABB in December 2022.

The details: The DOJ said its investigation focused on schemes to pay bribes to government officials in South Africa and Indonesia, while the SEC said SAP employed third-party intermediaries and consultants to pay bribes to government officials across seven countries: Azerbaijan, Ghana, Indonesia, Kenya, Malawi, South Africa, and Tanzania.

Regarding South Africa, SAP and certain of its agents, between 2013 and 2017, schemed to pay bribes and falsify the company’s books, records, and accounts to win contracts with the cities of Johannesburg and Tshwane, a South African state-owned and -controlled custodian of water services, and South African state-owned and -controlled energy company Eskom Holdings, according to the DOJ.

Eskom was also at the center of the ABB bribery case.

In Indonesia, between 2015 and 2018, SAP’s bribery scheme was aimed at winning business from the Indonesian Ministry of Maritime Affairs and Fisheries and a state-owned and -controlled telecommunications agency, the DOJ said.

The SEC’s order, the findings of which SAP consented to, added Malawi, Kenya, Tanzania, and Ghana as countries where the company’s intermediaries sought to pay bribes between 2014 and 2018. An SAP employee provided improper gifts to a government official to obtain and retain business in Azerbaijan in January 2022, the agency added.

The SEC found SAP inaccurately recorded bribes as legitimate business expenses in its books and records and did not implement sufficient internal accounting controls over its third parties or properly oversee its subsidiaries.

Compliance considerations: The DOJ said SAP’s criminal penalty reflected a 40 percent reduction off the 10th percentile above the low end of its sentencing guidelines range. Held against the company were its settlements with the DOJ and other agencies in April 2021 for admitted Iran sanctions violations and with the SEC in 2016 over alleged FCPA violations in Panama.

The DOJ and SEC each noted a significant amount of cooperation factors, including the company:

• Promptly producing relevant documents and making employees available for interviews;
• Resolving potential issues between its internal investigation and that of the U.S. government;
• Imaging the phones of relevant custodians to ensure preservation of communications on mobile messaging applications;
• Eliminating its third-party sales commission model globally and enhancing its resources dedicated to ethics and compliance;
• Expanding its data analytics capabilities to cover more than 150 countries and identify and review high-risk transactions and third party controls; and
• Establishing an enhanced whistleblower platform.

SAP also disciplined employees found to be involved in the misconduct, including through clawbacks. The company earned a $109,141 reduction on its criminal penalty under the DOJ’s compensation clawback pilot program.

“This case demonstrates not only the critical importance of coordinated international efforts to combat corruption but also how our corporate enforcement policies incentivize companies to be good corporate citizens: by cooperating with our investigations and appropriately remediating so that we can take strong action to address misconduct,” said Acting Assistant Attorney General Nicole Argentieri of the DOJ’s Criminal Division in the agency’s release.

Company response: SAP said in a statement it welcomed the settlement agreements.

“SAP separated from all responsible parties more than five years ago and has since significantly enhanced its global compliance program and related internal controls,” the company said. “Our significant remediation efforts, combined with our full and proactive cooperation with the authorities, have led to full resolutions of these matters.”