Sun May Have Broken Some Bribery Laws

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» 08 May 2009

Sun May Have Broken Some Bribery Laws

Midway a $5.6 billion merger by software behemoth Oracle, Sun Microsystems recently reported in their 10-Q Quarterly Financial Filing with the Securities and Exchange Commission (SEC) that they may have violated several U.S. bribery laws abroad. The 10-Q filing also revealed some numbers on what Sun will have to pay in case the Oracle acquisition falls through: A termination fee of about $260 million and, in certain conditions, Sun might also be responsible for covering Oracle's out-of-pocket expenses relating to the merger agreements up to an extra amount of $45 million.

Sun's 10-Q filing kept the details of what happened and where it happened ambiguous and muddled at best, but it did reveal in the legal proceedings section (a necessary section that appears in all 10-K and 10-Q reports for major companies) that during fiscal year 2009 that ends this June, it discovered illegal activities in a certain foreign country that may have broken the Foreign Corrupt Practices Act (FCPA).

Sun clarifies that they are aware of the FCPA, its related regulations and statutes, the potential criminal sanctions, fines, and debarment from doing business with the U.S. federal government in connection with the violations, "any of which could have a material effect on our (Sun Microsystems's) business."

Historically speaking, the FCPA was passed in 1977 after more than 400 corporations confessed to using $300 million worth of bribery money to foreign government politicians, officials, and political parties throughout the mid-seventies. The act was then updated in 1988 and 1998 to reinforce the message that companies should not bribe foreign officials in order to maintain their business overseas. The U.S. Department of Justice works alongside the SEC to investigate all cases of bribery and payoffs.

Sun wrote in the 10-Q filing that they have voluntarily disclosed the results of their personal investigation to date to the DOJ, SEC, and all related governmental agencies in certain foreign countries. They further state that they're lending their full cooperation to the SEC and DOJ in regards with their examination of the matter. They also admit that the results of the case cannot be predicted.

Reuters has revealed as well that before making the acquisition bid on April 20, Oracle was already aware of Sun's bribery case and its succeeding investigation. The Wall Street Journal corroborates this news by featuring an Oracle spokesperson admitting that the company already knew about the situation from the beginning.