Corruption in SAP

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2024: SAP bribed officials to sell its software in the public sector. Now the company will pay $220 million for this

On January 10, 2024, the US Department of Justice announced that the German software developer SAP would pay more than $220 million to settle bribery charges. It's about bribing government officials in South Africa and Indonesia.

The proceedings were conducted by the Department of Justice and the US Securities and Exchange Commission (SEC). SAP has been accused of failing to comply with the U.S. federal Foreign Corrupt Practices Act (FCPA). It regulates "the facts of offering, promising, providing tangible and intangible benefits to any foreign official." In other words, the law prohibits companies from bribing foreign government officials in the interests of their business.

US Department of Justice announces that German software developer SAP will pay more than $220 million to settle bribery charges

According to court documents, SAP bribed foreign officials to sell its products in the public sector. In particular, as stated on the website of the Ministry of Justice, bribes were given for this and other valuable things were provided to civil servants of South Africa and Indonesia. The money was transferred in the form of cash and political donations. In addition, electronic transfers were carried out. Various luxury items were purchased in stores. SAP reportedly hired third-party intermediaries to pay bribes. In one case, the company paid $6.7 million to "consultants" who "never provided any services."

In particular, in the case of South Africa, approximately between 2013 and 2017, SAP, through some of its agents, participated in a scheme to bribe South African officials and falsify its books, records and accounts. This was done in order to gain undue benefits for SAP through various contracts with South African departments, agencies and institutions, including the city of Johannesburg, the city of Tshwane, the Department of Water and Sanitation and Eskom Holdings Limited (a South African state-owned power company controlled by the authorities).

In addition, according to the case file, approximately from 2015 to 2018, SAP participated in a bribery scheme for Indonesian officials - also in order to promote its software in the public sector. In this case, bribes were given to officials of the Indonesian Ministry of Maritime Affairs and Fisheries, as well as the Indonesian State Agency for Telecommunications and Information Accessibility.

SAP for the purpose of selling its products in the public sector bribed foreign officials

SAP paid bribes to state-owned enterprise officials in South Africa and Indonesia to obtain valuable government contracts, said acting Assistant Attorney General Nicole M. Argentieri, an employee of the Justice Department's criminal division.

At the same time, the SEC conducted its own investigation of SAP business practices. Representatives of this department found that the software manufacturer used bribery schemes not only in South Africa and Indonesia, but also in Malawi, Kenya, Tanzania, Ghana and Azerbaijan. The SEC found that SAP used third-party intermediaries to pay bribes to government officials from at least December 2014 to January 2022.

In accordance with the agreement reached, SAP will pay a criminal fine of $118.8 million and an administrative fine of $103.4 million. SAP will also continue to cooperate with authorities in any ongoing or future criminal investigations arising over a three-year period. Under the agreement, SAP would be cleared of two key charges if the company met certain conditions.^[1]

2019: SAP bribes officials in cash in suitcases

At the end of February 2019, it became known about another corruption scandal, in the center of which was SAP. The German enterprise software maker is suspected by American authorities of "inappropriate behavior" in Kenya and Tanzania, namely bribing officials.

According to the South African publication TechCentral, the consulting company Twenty Third Century Systems South Africa (TTCS SA), which cooperates with SAP, reported a bribe of $800 thousand, which SAP gave to the port authority of Tanzania to receive a contract worth $6.6 million. It is noted that the first part of the amount of $100 thousand was transferred in a suitcase in one of the restaurants in Barcelona. The rest of the officials received after the victory of the SAP partner in the tender.

In February 2019, SAP was at the center of another corruption scandal

This is a tender involving seven companies, with some bidders requesting much smaller amounts than TTCS. But the latter still became the winner of the competition thanks to bribes that SAP transferred through a law firm. The informant passed this data on to the American authorities as an anonymity, according to the TTCS website.^[2]

The allegations, which are being investigated by the US government, relate to deals made in 2014 and 2015, SAP told the Bloomberg news agency. Since then, the company and its partner, TTCS SA, have reshaped executive ranks and strengthened compliance with legislative requirements in the region.

After the bribery case was made public, SAP severed its partnership with TTSC and hired law firm Paul Hastings to investigate the incident, according to TechCentral.

Our policy is and always will be to carry out all the activities of the company in accordance with the letter and spirit of the applicable laws, - said in SAP.

TTCS SA, which promotes SAP software in Africa and the Middle East, is 49% owned by South African IT company EOH Holdings. The latter has repeatedly appeared in corruption allegations regarding government contracts in South Africa. According to an EOH spokesperson contacted by Bloomberg journalists, reports of bribery of officials in Kenya and Tanzania, which came to light in late February 2019, date back to the time leading up to the investment in TTCS, and EOH was unaware of what had happened when it agreed to the deal.

EOH owns TTCS, which has become involved in an SAP corruption scandal

That was before us. We have provided SAP with all the information we have on this issue, "said an EOH spokeswoman.

TechCentral writes that SAP does not allow TTCS operations "without passing an independent assessment by an external consultant," while EOH "fully took over any future TTCS transactions."

Earlier, the EOH was charged with corruption while receiving a contract from the South African Ministry of Defense. Because of this, Microsoft canceled two partnership agreements with EOH subsidiary Mthombo.

As the news agency notes, we are talking about the second corruption scandal in many years related to SAP on the African continent. By the end of February 2019, the US Department of Justice U.S. Securities and Exchange Commission and continue investigations, in which they collect evidence of the transfer of bribes to millions dollars of companies associated with the influential Gupta family. She had close ties with the ex-president of South Africa, who was involved in numerous corruption episodes.

Another scandal related to dishonest business conduct around SAP did not affect the company's quotes. After the opening of the Frankfurt exchange on March 1, 2019, the shares of the software manufacturer rose in price by 0.2% to 94.47 euros, and the market capitalization reached 115 billion euros. At the same time, EOH securities fell by 8.5%, and since the beginning of 2019 their value has decreased by 49%.^[3]

2018

SAP caught bribing officials in tens of millions of dollars contract

In early September 2018, it became known about a new episode of a corruption scandal in South Africa, in the center of which was SAP. President Cyril Ramaphosa called for an investigation to verify the legality of the contract between SAP and the Department of Water & Sanitation.

According to the South African leader, the Special Investigations Unit (SUI) will examine claims that this deal, worth 671 million rand ($44 million), "was not fair, competitive, transparent, equal and economic effective," and it could "violate laws, guidelines or political course."

In early September 2018, it became known about a new episode of a corruption scandal in South Africa, in the center of which was SAP

According to the investigation, SAP employees paid bribes to officials, and due to this, the German company received government contracts. Moreover, the Ministry of Water Management was not the only state structure that the software manufacturer bribed.

The company is aware of the contract that was the subject of SUI's investigation, SAP told Reuters. The vendor himself has been checking the work in the South African public sector since 2010, working closely with law enforcement agencies. SUI has been studying SAP's activities in the country since January 2015.

In March 2018, when SAP acknowledged the facts of bribery in working with state-owned companies Eskom and Transnet, the contract with the Ministry of Water Management was not mentioned. The investigation began after the body in charge of combating corruption in South Africa received an anonymous letter indicating illegal actions under the deal.

One of the statements contained in the letter was that that contract for $44 million was not needed at all, since the SAP software licenses purchased by the ministry concerned the same services for which software had already been purchased.^[4]

Completion of the investigation into the case of bribes on government contracts

In March 2018 SAP , she summed up the results of an internal investigation into the activities of her South African unit. The inspections confirmed "signs of misconduct" and the payment of kickbacks to companies associated with the Gupta family (had close ties to the former REPUBLIC OF SOUTH AFRICA Jacob Zuma president, who was involved in a corruption scandal).

In 2018, the Supreme Court of Appeals found Zuma guilty of fraud, bribery and  money laundering that involved multibillion-dollar transactions. SAP was also involved in this scandal.

SAP admitted bribes in government contracts

A legal audit conducted with the involvement of third-party experts showed that SAP paid 128.6 million South African rand (about $11 million) to intermediary companies controlled by the Gupta clan. Nevertheless, the company draws attention to the fact that no evidence of direct bribes to South African officials has been identified. The total cost of government orders received as a result of kickbacks is estimated at about $50 million.

The investigation confirmed the vulnerability of even strong control systems, so they require constant attention. We cannot turn back the clock, but we can promise to do better, "said Adaire Fox-Martin, executive member of the board of directors, who is responsible for global business with clients at the German company.

Commissions in those contracts were between 10% and 14.9%, she said, slightly below the level that an internal review would show.

SAP has audited five contracts in South Africa with state-owned electric utility Eskom and rail and freight operator Transnet. It turned out that the management of these companies received kickbacks from SAP. Three of the top managers of the German company involved in the bribes were fired without paying compensation, SAP said, adding that the company continues to cooperate with the authorities for the US and South African authorities as part of further investigation.^[5]

Eskom plans to conduct its own investigation into cooperation with SAP "to ensure compliance with company procedures and policies." Transnet refrains from commenting.

2017: Recognition in kickbacks and revision of sales strategy

In October 2017, SAP admitted paying bribes to structures close to the South African government for receiving government orders. The German company, which could violate US anti-corruption laws, intends to prevent this from happening in the future, so it decided to radically restructure its sales strategy around the world.

At the center of the scandal was South African President Jacob Zuma and the influential Gupta family (Gupta; has friendly ties with the head of state), who are accused of illegal distribution of tenders and total control over business. The clan denies the allegations, calling them "politically motivated." 

After admitting kickbacks to the government, SAP is radically reorganizing sales

However, SAP admitted to making kickbacks in the amount of $7.7 million in favor of companies associated with the Gupta family from December 2014 to November 2016. Thanks to them, the German manufacturer of corporate software received contracts for $48 million, involving the supply of software to state-owned companies Transnet and Eskom.

We are disappointed that SAP has damaged the reputation in South Africa: their community, our employees, partners with whom we work in South Africa, and, importantly, our clients there, "Adaire Fox-Martin, executive member of the board of directors, who is responsible for the German company for global doing business with clients, told Reuters.

The South African media became aware of SAP's corrupt actions back in July 2017, but then the company called these accusations unfounded and groundless. Soon after, the company sent on vacation four top managers who were allegedly involved in bribes. Personal electronic devices were seized from these employees, an investigation began with the involvement of the law firm Baker McKenzie.

According to SAP, one of these employees turned out to be innocent, so he will return to work. Disciplinary measures were taken against the other three, their nature is not specified.

According to The Financial Times, citing a report in the South African press, SAP agreed to pay a 10 percent "sales commission" to CAD House, owned by members of the Gupta family, in order to be able to do business with the country's largest port and railway operator, Transnet.^[6]

Although an investigation into corruption was ongoing by October 26, 2017, SAP said it had not identified evidence of paying bribes to officials directly. The company operated through close associates of the president.

SAP intends to prevent such scandals from repeating in the future. To do this, the company made significant changes to the work of foreign representative offices. In particular, bonuses for the sale of products under government contracts in countries ranked lower than 50th in the corruption perception rating according to the non-governmental international anti-corruption organization Transparency International have been canceled. Africa In 2016, Yuzhnaya occupied the 45th position, Russia - the 131st. Reuters reports that premiums for government orders have been abolished in,, Russia,, China India Italy Mexico and South Africa.

As of October 2017, SAP operates in more than 180 countries, and 122 high-risk states were included in the corruption perception rating in 2016, but the software company does not necessarily develop business in all these markets.

In addition, SAP has introduced additional control measures for third-party trading partners and VAD distributors who receive contracts for the supply of software and services from a European vendor. Finally, SAP was going to conduct an expanded audit of partners around the world and increase the staff in South Africa responsible for compliance with laws by the regional office.

We hope that our actions and quick response will show how much we are imbued with this problem and disappointed with this misconduct of SAP, "said Adair Fox-Martin.

In the largest opposition political party in South Africa, the Democratic Alliance announced the filing of a criminal lawsuit against the local SAP representative office for alleged money laundering and corruption. The party asked the company to provide all kinds of assistance to local police in the investigation.

SAP admits to American authorities that it paid $7.7 million to a company associated with the influential Gupta family in South Africa to secure contracts

The US Department of Justice and the Securities and Exchange Commission (SEC) also launched their own investigation under the Foreign Corrupt Practices Act. It was launched after Baker McKenzie contacted U.S. authorities in July 2017, SAP said, adding that the company was cooperating with U.S. law enforcement in that investigation.

In addition to SAP, several other large international corporations appear in corruption proceedings in South Africa. Other defendants include the consulting company McKinsey & Co. The largest South African bank Standard Bank in October 2017 announced the inspection of contracts with SAP and McKinsey due to the scandal.

SAP has promised to make public the findings of the internal investigation, which is backed by Baker McKenzie.

Corruption stories involving SAP have arisen before. In 2016, the SEC fined SAP $3.9 million for not preventing a bribery scheme used by one of the company's former sales executives to obtain lucrative government contracts in Panama.^[7]

2015: Bribery of Panamanian officials

At the end of December 2015, it became known that the former president of Panama, Ricardo Martinelli, participated in corruption schemes that allowed SAP to win millions of dollars in public procurement.

On December 16, 2015, an American court in the Northern District of California sentenced former SAP top manager Vicente Garcia to 22 months in prison on charges of bribing Panamanian officials, with the help of which a German company entered into government contracts for the supply of software. Bribery lasted from 2009 to 2013. The value of one of the contracts obtained by SAP by such an illegal means amounted to $14.5 million. Read more here.

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