SAP Is Being Investigated by the U.S. Over a Major International Kickback Scandal
The German business software giant SAP said Thursday that it has disciplined some of its employees and made major changes to its sales processes, in connection with yet another Gupta-related corruption scandal in South Africa.
It also said it had voluntarily reported itself over the situation, which involves contracts with the South African state rail company Transet and state utility Eskom, to the U.S. Department of Justice and the Securities and Exchange Commission (SEC), both of which are now investigating the company for potential violations of the U.S. Foreign Corrupt Practices Act.
The Indian-born Gupta brothers—Ajay, Atul, and Rajesh—are, together with president Jacob Zuma, at the center of numerous allegations of corruption in South Africa that have tarnished the presidency and the records of several multinational companies. The Guptas are extremely close to Zuma, to the extent that they reportedly have influence over who occupies senior cabinet positions, and there have been numerous allegations of Gupta-linked enterprises demanding kickbacks for arranging deals with state-owned companies. The Guptas and Zuma deny any wrongdoing.
In recent months, auditor KPMG fired its South African CEO over work done for the family, consultancy McKinsey froze its work for South African state-owned companies following allegations regarding a Gupta-linked deal with Eskom; public relations giant Bell Pottinger collapsed entirely after it was caught trying to organize a racially-divisive campaign for the Guptas.
SAP got hit with kickback allegations a few months back, in relation to a deal it secured with state rail firm Transnet. Investigative journalism outfit amaBunghane reported at the time that SAP paid a 10% sales commission to a Gupta-controlled firm called CAD House—which specialized in selling 3D printers—to clinch the deal.
On Thursday, SAP gave an update on an investigation of the matter, which is being conducted by law firm Baker McKenzie. In a statement, board member Adaire Fox-Martin said “the past three months have been humbling” for the company.
Baker McKenzie’s investigation established that SAP paid $7.7 million in commissions to Gupta-linked third parties, when securing software contracts with Transnet and Eskom.
Fox-Martin said SAP had made its voluntary disclosure to the U.S. authorities in July, shortly after the allegations hit. She said the investigation had so far “not revealed any evidence of a payment to a South African government official,” but it had “uncovered indications of misconduct in issues relating to the management of Gupta-related third parties.”
The company has now begun formal disciplinary proceedings against three of its employees, who were already on administrative leave. A fourth employee who was also suspended has since been found not to be involved in the affair, and will return to work.
SAP said it has made several changes in the wake of the scandal. Firstly, it has stopped giving sales commissions on public-sector deals in countries, including South Africa, that rank badly in global corruption indices. It is also beefing up its African compliance units, and is introducing “extensive additional controls and due diligence into relationships with sales agents and value-added resellers” around the world.