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Oracle: Why No Public Disclosure?

According to a report Wednesday in the Wall Street Journal, Oracle has been the subject of a criminal bribery investigation centered on selling practices in Africa. FBI agents and DOJ prosecutors, the report said, have been looking into the allegations for more than a year.

More than a year? Most boards of directors at public companies today quickly disclose any whiff of possible FCPA violations. After all, disclosure is the directors' best friend. It protects them from charges they withheld material information from investors and enforcement authorities. ('Cover ups are often worse than the original acts.')

So why no word from Oracle about the year-old federal investigation?

We don't know. But here are some guesses:

◙ The DOJ and FBI have been running an undercover operation and Oracle was cooperating by keeping things quiet. As we said, we're guessing here. But it could be that Oracle first went to the DOJ a year ago and said, 'Look, in Africa we're getting ripped off by our people and shaken down by crooked officials, and we need  some help.' So the company and the feds made a deal and kept it secret.

◙ Oracle didn't know about the investigation. It's possible (although unlikely) the company found out only when word leaked to the the WSJ. The DOJ and FBI don't tell every target it's under investigation. Maybe they didn't tell Oracle.

◙ The investigation is focused on Oracle's agents and not on Oracle itself. Press reports citing unnamed sources said investigators are looking at potential FCPA violations by both Oracle's employees and its agents in Africa. But if only Oracle's agents are in the crosshairs, and if Oracle took effective steps to control them but failed, Oracle itself may not have culpability. If true, then it might not need to disclose anything.

◙ Oracle already has immunity. Through early cooperation with the DOJ and SEC, perhaps Oracle has secured for itself some kind of immunity from an FCPA enforcement action. In that case, a disclosure may not be necessary. It would mean Oracle may be giving up employees, agents, and others to investigators. But the corporation itself would be safe from prosecution.

There's one other scenario. That Oracle knew about the investigation into its sales practices a year ago and simply chose not to make a disclosure. That seems unlikely in light of the benefits of disclosure and risks to directors and officers who keep quiet. But it's still a possibility.

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