German firm fined Sh15.8bn for bribery to secure Kenyan contracts

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German firm fined Sh15.8bn for bribery to secure Kenyan contracts

The major German software company SAP has agreed to pay penalties following revelations that it had made payments to Kenyan government officials to secure contracts in the country.

The company will now settle charges of bribery by paying $100 million (Sh15.8 billion). This resolution addresses allegations of corrupt practices in Kenya, Tanzania, South Africa, Malawi, Ghana, Indonesia, and Azerbaijan.

In 2019, a complaint from a whistleblower was filed with the US Securities and Exchange Commission and the US Department of Justice, asserting that SAP had engaged in corrupt activities and bribery, thereby violating US securities laws, including the Foreign Corrupt Practices Act.

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According to a statement from the Securities and Exchange Commission, SAP has agreed to pay nearly $100 million in disgorgement and prejudgment interest as part of the settlement to resolve the charges brought by the SEC.

“Our order holds SAP accountable for misconduct that spanned seven jurisdictions and persisted for several years and serves as a stark reminder of the need for global companies to be attuned to both the risks of their business and the need to maintain adequate entity-level controls over all their subsidiaries,” said SEC chief division of enforcement, FCPA Unit, Charles Cain.

From December 2014 to January 2022, SAP was discovered to have utilized third-party intermediaries and consultants for the purpose of making illicit payments to government officials.

These bribes were intended to secure business with public sector clients in seven countries.

Notably, during this period, the German company secured contracts with various entities, including Rural Electrification and Renewable Energy Corporation (REREC), Bamburi Cement, New KCC, Kenya Power and Lighting Company, Mumias Sugar, Bidco Oil Refineries, Mukwano Industries, Kakira Sugar, Diamond Trust Bank, and other prominent corporations in Kenya.

It’s essential to clarify that the inclusion of these companies in the list doesn’t imply their involvement in the corruption, but rather highlights the firms SAP collaborated with in Kenya during the specified timeframe.

The Securities and Exchange Commission (SEC) determined that SAP, whose American Depositary Shares are listed on the New York Stock Exchange, violated the Foreign Corrupt Practices Act (FCPA).

The SEC’s order states that SAP improperly recorded these bribes as legitimate business expenses in its financial records, despite some intermediaries being unable to demonstrate the services they were contracted for.

The SEC found that SAP lacked adequate internal accounting controls over these third parties and lacked entity-level controls over its wholly owned subsidiaries.

This is not the first time SAP faced such allegations, as in 2016, the SEC charged the company with violations related to a bribery scheme in Panama.

To settle the charges, SAP agreed to the SEC’s order, admitting to violating anti-bribery, recordkeeping, and internal accounting control provisions of the Securities Exchange Act of 1934.

SAP committed to cease and desist from further violations and agreed to pay disgorgement of $85 million plus prejudgment interest of over $13.4 million, totaling more than $98 million. This amount would be offset by up to $59 million already paid by SAP to the South African government concerning parallel investigations into the same conduct.

The SEC’s actions are part of a coordinated global settlement that involves the United States Department of Justice (DOJ) and both criminal and civil authorities in South Africa.

As part of the settlement, SAP agreed to pay the DOJ a $118.8 million criminal fine and a forfeiture of approximately $103 million, with $85 million being satisfied through the disgorgement payment outlined in the SEC’s order. The investigation by the SEC was led by Sana Muttalib and Sonali.

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German firm fined Sh15.8bn for bribery to secure Kenyan contracts

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