SAP Reports Itself to U.S. Authorities Over Gupta Scandal -- Update

By Gabriele Steinhauser Features Dow Jones Newswires

German software maker SAP SE has reported itself to U.S. authorities after paying 94 million rand ($6.7 million) to companies with ties to South Africa's controversial Gupta family to secure contracts with state-owned enterprises.

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SAP said Thursday it had made presentations to prosecutors at the U.S. Department of Justice and the Securities and Exchange Commission under the Foreign Corrupt Practices Act. Cooperating with U.S. authorities in corruption investigations can lead to lower fines.

The Guptas are at the center of a boiling corruption scandal in South Africa for allegedly using their close relationship with President Jacob Zuma to amass great personal wealth. The Guptas and Mr. Zuma have denied wrongdoing.

The scandal has drawn in several international companies, including KPMG International and McKinsey & Co., which have both launched internal probes to investigate their ties to the Guptas, but have denied wrongdoing.

SAP is the first Western company to say it may have broken U.S. anticorruption laws by making payments to companies linked to the Guptas.

It said it paid two companies a total of 94 million rand between Dec. 2015 and Nov. 2016 to help secure four contracts with South Africa's state-owned rail and port operator, Transnet, and state power company Eskom.

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The contracts earned SAP around 660 million rand, it said.

The company said it had started disciplinary action against three staff members for "indications of misconduct." It declined to name the employees or their positions within the company.

The payments were booked as commissions for securing the contracts, SAP said.

Adaire Fox-Martin, who leads SAP's business in the Europe, the Middle East and Africa, said the company was still investigating the reason for the payments.

"What did they actually do to warrant a commission payment of the amount that we see here?" she asked.

SAP launched an internal probe into alleged payments to Gupta-related companies after they were reported by South African media in July. This followed a large document leak that appeared to have come from a Gupta company hard drive.

"To date, the investigation has not revealed any evidence of a payment to a South African government official, including Transnet and Eskom employees," SAP said in a statement. "It has, however, uncovered indications of misconduct in issues relating to the management of Gupta-related third parties."

Preliminary findings from the probe show SAP's ties with Gupta-related entities lasted longer than previously reported.

SAP said that between Dec. 2016 and June 2017, it secured two further contracts with Eskom with the help of a Gupta-related entity. However, it said it hadn't yet received any revenue from those contracts or made any payments to the company.

Ms. Fox-Martin said SAP hadn't reported any potential wrongdoing to South African authorities. South African police and prosecutors have said they are investigating allegations of corruption stemming from the email leak.

As a result of its findings, SAP said it would stop paying sales commissions on all public-sector deals in countries that score lower than 50 out of 100 points on Transparency International's Corruption Perception Index. South Africa's most recent score was 45.

SAP said its internal investigation, which examines all public-sector business in South Africa since 2010, continues and that it expects to make further disclosures in the future. "It is by no means finished," said Ms. Fox-Martin.

Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com

(END) Dow Jones Newswires

October 26, 2017 06:40 ET (10:40 GMT)