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

German Software giant SAP has agreed to pay fines after it emerged that it paid Kenyan government officials to land tenders in the country.

The firm will now pay $100 million (Sh15.8 billion) in fines to settle charges of paying bribes to win business in Kenya, Tanzania, South Africa, Malawi, Ghana, Indonesia and Azerbaijan.

In 2019, a whistle-blower complaint, lodged with the US Securities and Exchange Commission and the US department of justice, indicated that SAP was involved in corruption and bribery in violation of US securities laws, including the Foreign Corrupt Practices Act.

Securities and Exchange Commission in a statement said SAP has agreed to monetary sanctions of nearly $100 million in disgorgement and prejudgment interest to settle the SEC's charges.

"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 at least Dec 2014 to Jan 2022, SAP was found to have employed third-party intermediaries and consultants to pay bribes to government officials, to obtain business with public sector customers in the seven countries.

The German firm has in the period under review undertaken contracts at Rural Electrification and Renewable Energy Corporation (REREC), Bamburi Cement, New KCC and the Kenya Power and Lighting Company.

Others are Mumias Sugar, Bidco Oil Refineries, Mukwano Industries, Kakira Sugar and Diamond Trust Bank among other leading corporates.

This however does not mean the aforementioned firms were involved in the vice, but only a list of companies SAP has worked with in Kenya.

The SEC's order finds that SAP, whose American Depositary Shares are listed on the New York Stock Exchange, violated the FCPA by employing third-party intermediaries and consultants from at least December 2014 through January 2022, to pay bribes to government officials.

This is to obtain business with public sector customers in the seven countries.

According to the SEC's order, SAP inaccurately recorded the bribes as legitimate business expenses in its books and records, even though certain of the third-party intermediaries could not show that they provided the services for which they had been contracted.

The SEC's order finds that SAP failed to implement sufficient internal accounting controls over the third parties and lacked sufficient entity-level controls over its wholly owned subsidiaries.

In 201 6, the SEC charged SAP with books and records and internal accounting controls violations in connection with a bribery scheme in Panama.

SAP consented to the SEC's order finding that it violated the anti-bribery, recordkeeping, and internal accounting controls provisions of the Securities Exchange Act of 1934.

SAP agreed to cease and desist from committing or causing any violations of these provisions and to pay disgorgement of $85 million plus prejudgment interest of more than $13-4 million, totaling more than $98 million.

This will be offset by up to $59 million paid by SAP to the South African government in connection with its parallel investigations into the same conduct.

The SEC's action is part of a coordinated global settlement that includes the United States Department of Justice (DOJ) and criminal and civil authorities in South Africa.

In its parallel case, SAP agreed to pay the DOJ a $118.8 million criminal fine and a forfeiture of approximately $103 million, of which $85 million will be satisfied by the company's payment of disgorgement pursuant to the SEC's order.

The SEC's investigation was conducted by Sana Muttalib and Sonali Singh and was supervised by Ansu N. Banerjee of the SEC's FCPA unit.