SAP faces corruption charges for paying $7.7 mn to bag $48 million deal

SAP IndiaBusiness software major SAP has revealed that its third parties paid commission of $6.8 million to bag sales orders worth $48 million in South Africa.

SAP is currently facing investigations related to bribery charges and the German company has fired three employees after unearthing the corruption issue.

SAP provided software and received revenue totaling $48 million, and paid commissions to entities associated with some Gupta totaling $6.8 million. SAP said the amounts actually paid to the third parties totaled approximately $7.7 million including VAT on commission payment.

The sale was done in In December 2014 and November 2016 when SAP concluded two contracts for the sale of software to Transnet and two contracts for the sale of software to Eskom, each with the assistance of an external entity.

SAP also concluded two additional IT contracts to provide software and services to Eskom with the assistance of Gupta-related entity in December 2016 and June 2017 without any sales revenue or commissions.

SAP has made the disclosure to U.S. authorities responsible for enforcing the U.S. Foreign Corrupt Practices Act. SAP has initiated disciplinary procedures against three employees and made significant changes to its global sales deal processes.

Adaire Fox-Martin, member of the Executive Board of SAP, said: “The allegations of wrongdoing in our South African business have had a profound impact on our employees, customers and partners, and on the South African public — and we apologize wholeheartedly for this.”

SAP said the investigation has not revealed any evidence of payment to a South African government official, including Transnet and Eskom employees.

SAP has instituted formal disciplinary proceedings, in accordance with South African labor law, against three employees who were placed on administrative leave at the beginning of the investigation.

SAP decided to eliminate sales commissions on all public sector deals in countries with a Corruption Perceptions Index (according to Transparency International) below 50, effective immediately. South Africa’s rating is 45.

The SAP Executive Board has initiated — on a global basis — extensive additional controls and due diligence into relationships with sales agents and value-added resellers, including additional audit functions.

SAP will allocate additional legal compliance staff to the SAP Africa market unit. They will be based in South Africa and report into SAP’s Global Compliance organization.

SAP will further strengthen its Compliance Committee in the SAP Africa region, consisting of local management, compliance and other corporate functions, to ensure individual deal sanity and integrity, and promote compliance generally.

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