Oracle ‘no comment’ on IFMS corruption allegations

March 11, 2019 Siyabonga Mtangana

Oracle’s head office in Redwood Shores, California. Image: Håkan Dahlström (CC BY 2.0)

US software giant Oracle has issued a stern “no comment” to accusations that it hired a former senior national treasury official in order to secure a contract — said to be worth as much as R1-billion — to supply software for a major overhaul of the South African government’s core IT systems.

An anonymous whistle-blower alerted the US Securities and Exchange Commission and the US department of justice to possible violations of the US Foreign Corrupt Practices Act (FCPA) in the award of the tender.

As an American-listed company, Oracle could face severe penalties under the FCPA if it’s found that the company secured the tender irregularly.

TechCentral has learnt that Oracle, upon learning of “concerns” about the tender in 2017, hired US law firm Paul Hastings to investigate. Oracle declined to share the report or even comment at all on the allegations. “We will not comment on this request,” it said in e-mailed response to a detailed set of questions.

In a letter to Oracle audit committee chairman Michael Boskin, the whistle-blower, through a firm of attorneys, alleged that Oracle hired the senior treasury official — whose name is known to TechCentral — weeks after receiving the tender to overhaul government’s integrated financial management system (IFMS).

“Oracle South Africa hired the treasury official who was instrumental in Oracle receiving this massive deal,” the whistle-blower said, alleging that this was a “quid pro quo”: the official allegedly secured the deal for Oracle in exchange for a senior-level position at the software company’s South African office.

‘Brazen violation’

Describing this as a “brazen violation of the FCPA” — the position offered to the former treasury official allegedly hadn’t existed prior to his appointment — the whistle-blower said the award of the tender to Oracle should be “thoroughly investigated”.

The idea behind the IFMS is to create an integrated IT system to run national government. It includes modules such as human resources and payroll, supply-chain, financial, and inventory management. The project has been led by national treasury in partnership with the State IT Agency (Sita) and the department of public service & administration.

TechCentral sent a detailed set of questions to Oracle’s global chief compliance and ethics officer, Greg Vamos, and to the company’s South African office. The local office said that, after consulting with Oracle’s globally, it would not comment on the allegations or respond to the questions.

However, TechCentral has seen correspondence in which Vamos confirmed that Oracle became aware of the concerns related to the IFMS deal in 2017 and retained the services of Paul Hastings to investigate. It’s not known what Paul Hastings found in its probe.

These are some the questions TechCentral wanted Oracle to answer:

What prompted Oracle in 2017 to hire Paul Hastings and investigate the corruption concerns connected to the IFMS deal?
What were the findings of the Paul Hastings report? Did they clear Oracle, or did they uncover evidence of malfeasance?
If the latter, what malfeasance was uncovered and what action did Oracle take as a result of the report? Was anyone reprimanded or fired? Were any Oracle employees referred to the police for investigation and prosecution?
Is it true that Oracle had discussions with the former treasury official about his joining Oracle prior to Oracle receiving the IFMS deal?
Has Oracle alerted the US Securities and Exchange Commission, the US department of justice and South Africa’s Special Investigating Unit to either the whistle-blower’s complaint or to Paul Hastings’ findings and report?
Has Oracle been paid in full for the IFMS tender?

Asked for comment, national treasury said the procurement process for the tender was conducted under the auspices of Sita and not treasury.

“Bid number 1282/2014, which culminated in the contract with Oracle, was published in November 2014 and the adjudication process was completed in June/July 2015. The contract itself was concluded in April 2016, following the completion of a value-assurance process,” a treasury spokesman said by e-mail.

The former treasury official implicated in the whistle-blower report worked for treasury from 1 May 2015 to 31 October 2016, the spokesman said. The process, he said, was well under way when he was appointed to national treasury and he remained an employee after the contract was awarded.

A forensic investigation found “no evidence of wrongdoing in the process and appointment of Oracle”.

Officials at national treasury, the spokesman said, are not aware of the Paul Hastings report. “National treasury does not seem to have had sight of the whistle-blower’s report nor the Paul Hastings report and can therefore not have acted. However, if national treasury is informed of any allegations of impropriety or malfeasance, it will act,” the spokesman said.

“This commitment is evidenced by the national treasury internal audit report into the IFMS and the subsequent forensic investigation instituted by national treasury, overseen by the national treasury audit committee and conducted by Nexus Forensic Investigations.”