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« Resource alert: OFAC 2015 fall symposium (September 22) | Main | Job: Compliance Counsel (3M) »
Wednesday
Aug122015

Ex SAP executive admits paying ‘necessary’ Panama bribes

A former regional director of SAP International Inc. pleaded guilty Wednesday to conspiracy to violate the Foreign Corrupt Practices Act by bribing Panamanian officials to win government technology contracts for SAP.

Vicente Eduardo Garcia, 65, of Miami, pleaded guilty to a one-count criminal information charging him with conspiracy to violate the FCPA's antibribery provisions.

Sentencing before Senior U.S. District Court Judge Charles R. Breyer of the Northern District of California is scheduled for December 16.

Also on Wednesday, Garcia settled an SEC enforcement action that charged him with orchestrating a bribery scheme.

In late 2009, the DOJ said, SAP sought a multi-million dollar contract to provide a Panama state agency with a technology upgrade package. 

Garcia conspired with SAP advisors and consultants to bribe two Panamanian government officials, and the agent of a third official on the understanding that some money go to the official. 

According to the DOJ, Garcia said he believed paying the bribes was "necessary to secure both the initial contract and additional Panamanian government contracts."

Garcia and the other conspirators used sham contracts and false invoices to disguise the bribes, the DOJ said. 

To fund the bribes, the SEC said, Garcia sold SAP software to a partner in Panama at discounts of up to 82 percent. 

"The excessive discounts enabled the partner to create a slush fund from its excessive earnings on the other end of the sales and tap that money to pay the bribes to Panamanian government officials so SAP could sell the software," the SEC said.

Garcia also received kickbacks from the slush fund, the SEC said.

The SEC settled with Garcia through an administrative action and didn't go to court.

Garcia violated the antibribery and internal controls provisions of the FCPA, according to the SEC's order.

To settle with the SEC, he agreed to disgorge $85,965 -- the total amount of kickbacks he received -- plus prejudgment interest of $6,430 for a total of $92,395.

The bribes helped SAP’s Panama channel partner win the technology upgrade contract for $14.5 million, including $2.1 million in software licenses for SAP.

The Panama government soon awarded the channel partner more contracts that included additional SAP products worth about $1.2 million.

Germany-based SAP trade4s on the New York Stock Exchange. It provides services in more than 180 countries and has more than 68,000 employees. 

*     *     *

The DOJ's criminal information is here (pdf).

The SEC's Securities Exchange Act of 1934 Release No. 75684, Accounting and Auditing Enforcement Release No. 3678, and Administrative Proceeding File No. 3-16750 (dated August 11, 2015) are here (pdf).

________

Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

Reader Comments (3)

Richard: So does SAP walk away from this untouched? From the article it sounds like SAP was in on the scheme so why is only the individual Mr. Garcia being held accountable?
August 12, 2015 | Unregistered CommenterMark DeLuca
How does a non-issuer (individual) violate internal controls provisions ("Garcia violated ... internal controls provisions of the FCPA, according to the SEC's order.")? Is it rather that he circumvented internal controls, which is itself a violation (s.78M(b)(5))? I do not wish to be pedantic but want to know if this a new jurisdictional (over)reach.
August 12, 2015 | Unregistered CommenterEve Hill
Here's some relevant jurisdictional and charging language from the SEC's administrative order:

In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, Respondent admits the Commission’s jurisdiction over him and the subject matter of these proceedings, and consents to the entry of this Order Instituting Cease - and - Desist Proceedings, Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease - and - Desist Order (the “Order”), as set forth below. . . .

Section 13(b)(5) of the Exchange Act provides that no person shall knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record or account of an issuer described in Section 13(b)(2) of the Exchange Act . Exchange Act Rule 13b2 - 1 prohibits any person from, directly or indirectly, falsifying or causing to be falsified any book, record, or account subject to Exchange Act Section 13(b)(2)(A). Scienter is not an element of a Rule 13b2 - 1 violation. See SEC v. McNulty, 137 F.2d 732, 740 - 41 (2nd Cir. 1998). . . .

Garcia knowingly falsified SAP Mexico’s books and records by engaging in a scheme to create a slush fund at the local partner , which was used to pay bribes to Panamanian government officials. Garcia also knowingly circumvented the company’s internal controls to change the sale of the software licenses from a direct sale to the government of Panama to an indirect sale through intermediaries at deep discounts in order to facilitate payments to government officials.
August 13, 2015 | Registered CommenterRichard L. Cassin
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