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Sun Microsystems May Have Violated Bribery Law

Posted by Soulskill on from the my-friend-abraham-lincoln-asks-you-to-look-the-other-way dept.

Afforess writes "In a new file submitted to the Securities and Exchange Commission, Sun Microsystems admitted that 'we have identified potential violations of the Foreign Corrupt Practices Act, the resolution of which could possibly have a material effect on our business.' The Foreign Corrupt Practices Act makes it 'unlawful to make a payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person.' Yet, Sun would not release further details, only that it 'took remedial action.' Oracle, the new owner of Sun Microsystems, also said that they had prior knowledge of the infraction, yet also refused to release any details."

1 of 111 comments (clear)

  1. Re:Since most people don't RTFA by section321 · · Score: 0, Redundant

    And to those of you that aren't accounts (thank your lucky stars) you need to understand that the phrase "material" has a very specific meaning in this context. A material item in your financial statements is an item large enough to affect the decision of the people who use financial statements to make decisions. (e.g. investors, banks, regulators, etc...) When the financial auditors start their audit, they will calculate a materiality threshold, above which items must be disclosed on the financial statements. The potential fine for this FCPA violation exceeds that materiality threshold. I don't know what Sun's materiality threshold is, but I'm sure its not small.

    Also, on the topic of FCPA, while the article cites some smaller FCPA fines it misses the recent large fine levied against Siemen in December 2008. The total hit to Siemens included a fine of $450 MILLION plus disgorgement of $350 MILLION in "tainted profits." If that isn't a "big deal" I don't know what is. It takes a lot of revenue to replace $800,000,000 in cash.

    Because this is big enough that Sun disclosed it on their financial statements before the Justice Department has issued its fine indicates to me this is likely to be a bigger rather then smaller issue. Foreign bribery is fairly common, but it doesn't mean getting caught isn't a big deal.