Enforcement Action

 

Docket or Case Number:    3-17080

Court:    N/A

Initiation Date:    02/01/2016  Information

Prosecuting Agency:    US Securities and Exchange Commission

Name of Prosecuting Attorneys:    N/A

Assisting Agencies:    U.S. Department of Justice , Federal Bureau of Investigation , U.S. Attorney's Office for the Northern District of California

Type of Action:    SEC Administrative Proceeding

Origin of the Proceeding:    SEC investigation

Whistleblower:    Unknown

Case Status:    Resolved


Summary

SAP SE (“SAP”) was a European Union corporation headquartered in Waldorf, Germany. SAP’s American Depository Shares were registered with the SEC pursuant and listed on the New York Stock Exchange. SAP markets its software all over the world through various country subsidiaries.

Vicente E. Garcia was a U.S. citizen and SAP’s Vice-President of Global and Strategic Accounts, responsible for sales in Latin America for SAP from February 2008 until April 2014, when SAP terminated Garcia for his misconduct described herein. Although Garcia was technically employed by SAP International, Inc. ("SAPI"), SAP's wholly-owned Brazilian subsidiary, SAP presented him to customers as an SAP employee and his supervisors included employees of SAPI.

Between at least June 2009 to November 2013, Garcia discounted the price of SAP software to a former SAP local partner at a level sufficient to permit Garcia and the local partner to pay $145,000 in bribes to one senior Panamanian government official, and offer bribes to two others. Through these bribes, Garcia secured government sales contracts of approximately $3.7 million for SAP, and also self-profited through kickbacks. By excessively discounting the SAP software, Garcia created a slush fund that the partner used to pay the bribes and kickbacks. Garcia concealed his scheme from others at SAP, circumvented SAP’s internal controls, and justified the excessive discounts by falsifying SAP’s internal approval forms. The deep discounts that Garcia used to create the slush fund were falsely recorded as legitimate discounts on the books of SAP Mexico S.A. de C.V., SAP’s Mexican subsidiary, which were subsequently consolidated into SAP’s financial statements.

In an administrative proceeding on February 1, 2016, the SEC ordered SAP to cease and desist violating the books & records and internal controls provisions of the FCPA. Without admitting or denying responsibility, SAP agreed to the order and to pay disgorgement of $3.7 million plus prejudgment interest of $188,896.

In related proceedings, the SEC also issued a Cease and Desist Order against Garcia on August 12, 2015, and the DOJ filed a single count Information in the Northern District of California against Garcia alleging conspiracy to violate the anti-bribery provisions of the FCPA on July 13, 2015.

Under the terms of the cease and desist order, the SEC ordered Garcia to stop violating the anti-bribery, books & records, and internal controls provisions of the FCPA and required Garcia to disgorge $85,965, representing the kickback Garcia received in connection with the bribery scheme, plus prejudgment interest of $6,430.

On August 12, 2015, Garcia pleaded guilty to the DOJ charge. On December 16, 2015, the court sentenced Garcia to 22 months in prison to be followed by 3 years of supervised release and ordered him to pay a mandatory assessment of $100. The fine was waived.

Country(ies) involved:    Panama

Sanction to Bribe Ratio:    $3,888,896 / $145,000 = 2682.00 %

Sanction to Revenue Ratio:    $3,888,896 / $3,700,000 = 105.10 %

Sanction to Profit Ratio:    N/A

Number of Related Enforcement Actions (Including This Enforcement Action):    3

Country(ies) involved:    Panama

Total $ Bribery Payments:    $145,000

Total $ Revenue Generated from Bribery:    $3,700,000

Total $ Profit Earned or Expenses Avoided from Bribery:    N/A

Total $ Monetary Sanctions:    $3,981,391

Sanction to Bribe Ratio:    $3,981,391 / $145,000 = (2745.79 %)

Sanction to Revenue Ratio:    $3,981,391 / $3,700,000 = (107.61 %)

Sanction to Profit Ratio:    N/A

Name:    SAP SE

Place of Incorporation:    Germany

HQ Country(ies):    Germany

Entity Type:    Public Company

FCPA Claims:    Books & Records, Primary, Issuer (15 U.S.C. § 78m (b)(2)(A)) ; Internal Controls, Primary, Issuer (15 U.S.C. § 78m(b)(2)(B))

Related Claims:    N/A

Statutory Basis for FCPA Jurisdiction:    Issuer

Period of Bribery:   2009 - 2013

Total Bribery Payments:    $145,000

Total Revenue Generated from Bribery:    $3,700,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Panama

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Officials; Panamanian government
  • Government Official; Official; Panamanian government

Defendant-Related Entities Involved in the Misconduct:    N/A

Third-Party Intermediary:   

  • Local Partner , Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    No Available

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Payments to Panama

Period of Bribery:   2009 – 2013

Total Bribery Payments:    $145,000

Total Revenue Generated from Bribery:    $3,700,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Panama

Officials Potentially Influenced (Name; Title; Organization):  

  • Government Official; Official; Panamanian government;
  • Name N/A, Officials; Panamanian government;

Defendant-Related Entities Involved in the Misconduct:    N/A

Third Party Intermediary:    Local Partner - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    No Available

Purpose of Bribe:    Obtain/retain business

Misconduct by Subsidiary?  Yes


Parent(s):   SAP SE

Subsidiary:  SAP International, Inc.

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  SAP Mexico S.A. de C.V.

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     No

Re: SAP SE

  • Inadequate internal controls or auditing
  • Inadequate supervision of subsidiaries and/or employees

Mitigating Factors Referenced by the Government (Company Defendants):

Defendant Self-Report Cooperation Voluntary Remedial Measures Misconduct Limited to Low Level Individuals Other factors
SAP SE      

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
SAP SE    

Total Monetary Sanctions for the Action:    $3,888,896

Case Status:    Resolved


Disposition:    Cease and Desist Order

Date of Disposition:    02/01/2016

SAP SE

—  Total Monetary Sanctions for Defendant:    $3,888,896

—  Compliance Obligation:    No

—  Reporting Obligation:    No reporting

—  Admission of Guilt/Acceptance of Responsibility:    No

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