A Friday focus on disclosures. The SEC asks Oracle – what about that FCPA issue, the SEC takes an interest in Libya, and yet another voluntary disclosure.
As noted in this previous post, in September 2011 Joe Palazzolo and Samuel Rubenfeld broke the story in the Wall Street Journal, “U.S. Probes Oracle Dealings,” that “U.S. authorities are investigating whether Oracle Corp., one of the world’s largest software companies by sales, violated federal antibribery laws in its dealings abroad …”. According to the report, “agents in the FBI’s Washington field office and fraud prosecutors in the Justice Department’s Criminal Division are handling a criminal investigation, which has been underway for at least a year.” Palazzolo and Rubenfeld also report that the SEC is also investigating for possible civil violations. According to the report, “the agencies are examining whether Oracle employees or agents acting on the company’s behalf made improper payments in Africa in order to land sales of database and applications software.”
Since then, Oracle’s SEC filings have been silent as to any FCPA inquiry. The SEC wants to know why as demonstrated by this February Q&A between the SEC Division of Corporation Finance and Oracle filed by the company.
SEC: “We also note various news articles indicating that the company has been subject to investigations regarding possible Foreign Corrupt Practices Act violations for more than a year. Please tell us how you considered the guidance in paragraphs 50-3 through 50-5 of ASC 450-20-50 in evaluating the need to disclose these pending matters.”
Oracle Response: “We make a quarterly assessment of legal matters, including the matters referenced in the Staff’s inquiry above, to determine how those matters should be treated in the context of the accounting and disclosure requirements of paragraphs 50-3 through 50-5 of ASC 450-20-50. For those matters referenced above, we evaluated whether it was reasonably possible that a loss or a loss exceeding amounts already recognized may be incurred. We determined that the estimated ranges of additional losses for those matters referenced above, if any, either individually or in the aggregate, would not have a material effect on our consolidated financial position, results of operations or cash flows. Consequently, we believe our disclosures comply with the aforementioned guidance.”
ASC 450-20-50 you ask? ASC 450 is the former FASB 5 standard regarding gain and loss contingencies (i.e. when a company should record, disclose or not disclose certain contingencies).
Two foreign oil companies with ADRs traded on U.S. exchanges recently disclosed SEC scrutiny concerning conduct in Libya.
In this recent SEC filing, French oil company Total S.A. stated as follows.
“In June 2011, the SEC issued to certain oil companies – including, among others, TOTAL – a formal request for information related to their operations in Libya. TOTAL is cooperating with this non-public investigation.”
See here for a recent prior post concerning Total’s FCPA scrutiny in Iran.
In this recent SEC filing, Italian oil company Eni SpA stated as follows.
“On June 10, 2011 Eni received by the US SEC a formal judicial request of collection and presentation of documents (subpoena) related to Eni’ s activity in Libya from 2008 to 2011. The subpoena is related to an ongoing investigation without further clarifications nor specific alleged violations in connection to “certain illicit payments to Libyan officials” possibly violating the US Foreign Corruption Practice Act. At the end of December 2011, Eni received a request for the collection of further documentation aiming at integrating the subpoena previously received. Eni is fully collaborating with the US SEC.”
For more on the recent Libya disclosures, see here from Samuel Rubenfeld at Wall Street Journal Corruption Currents.
As highlighted in this prior post, in July 2010, Eni was a party in the DOJ/SEC’s Bonny Island Nigeria focused FCPA enforcement action which resulted in $365 million in combined fines and penalties.
Another Voluntary Disclosure
“The Company is conducting an investigation to determine whether certain employees of SL Xianghe Power Electronics Corporation, SL Shanghai Power Electronics Corporation and SL Shanghai International Trading Corporation, three of the Company’s indirect wholly-owned subsidiaries incorporated and operating exclusively in China, may have improperly provided gifts and entertainment to government officials. Based upon the initial investigation, which is ongoing, the preliminary estimate of the amounts of such gifts and entertainment does not appear to be material to the Company’s financial statements. There can be no assurance, however, that after further inquiry the actual amounts will not be in excess of what is currently estimated. Such estimate does not take into account the costs to the Company of the investigation or any other additional costs. The Company’s investigation includes determining whether there were any violations of laws, including the U.S. Foreign Corrupt Practices Act. Consequently, on March 29, 2012, the Company’s outside counsel contacted the DOJ and the SEC voluntarily to disclose that the Company was conducting an internal investigation, and agreed to cooperate fully and update the DOJ and SEC periodically on further developments. The Company has retained outside counsel and forensic accountants to assist in its investigation of this matter. Because the investigation is ongoing, the Company cannot predict at this time whether any regulatory action may be taken or any other adverse consequences may result from this matter.”
According to my tally, the new disclosures discussed above means that in the last six weeks, seven companies have newly disclosed FCPA scrutiny. See here for the prior post “The Sun Rose, a Dog Barked, and a Company Disclosed FCPA Scrutiny.” If SEC filings are your ideal form of pleasure reading, you can hardly wait to see what next week holds.
A good weekend to all.