SAP Fined $3.7M Over Panama Bribery Scheme

The SEC alleges the software vendor's flawed internal controls enabled a former VP to bribe a Panamanian government official.
Matthew HellerFebruary 1, 2016

Software vendor SAP SE has agreed to pay $3.7 million to settle charges relating to the bribery of a Panamanian government official to obtain government sales contracts.

The U.S. Securities and Exchange Commission said Monday that deficiencies in SAP’s internal controls enabled Vicente Garcia, its former vice president of global and strategic accounts, to sell software licenses at an 82% discount to the firm’s partner in Panama, creating a slush fund that the partner used to pay $145,000 in bribes.

Through the bribes, Garcia allegedly secured government sales contracts of approximately $3.7 million for SAP.

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“SAP’s internal controls failed to flag Garcia’s misconduct as he easily falsified internal approval forms and disguised his bribes as discounts,” Kara Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act unit, said in a news release.

As part of a settlement of the charges, SAP will pay disgorgement of its profits from the sales to Panama plus prejudgment interest of $188,896. Garcia was sentenced to 22 months in prison after pleading guilty last year to related criminal charges.

SAP is headquartered in Germany and executes most of its sales through a network of worldwide corporate partners. According to the SEC, Garcia used bribery to obtain four contracts from the Panamanian government between 2010 and 2013.

“The excessive discounts enabled the partner to create a slush fund from its excessive earnings on the other end of the sales and tap that money to pay the bribes to Panamanian government officials so SAP could sell the software,” the SEC alleged.

According to regulators, SAP lacked adequate internal controls to ensure that discounts to local partners were not improperly used. While its system required employees to electronically submit requests to SAP to obtain approval of discounts, employees “had wide latitude in seeking and approving discounts to local partners, and employees’ explanations for the discounts were accepted without verification,” the SEC said in an administrative order.

The order found that SAP violated the internal controls provisions and the books and records provisions of the FCPA.