SAP Finds Signs of Misconduct at Its South African Unit -- 2nd Update

By Gabriele Steinhauser 

JOHANNESBURG -- German software maker SAP SE said Thursday that an internal probe of its South African unit found "indications of misconduct" as well as more payments to companies tied to a family at the center of a political corruption scandal here.

SAP said in October it had reported itself to the U.S. Department of Justice and the Securities and Exchange Commission over payments made to entities related to the Guptas, close friends of former President Jacob Zuma who are being investigated by South African authorities for alleged corruption.

The Guptas have been accused by government officials and civil-society groups of using their friendship with Mr. Zuma to gain lucrative state contracts and influencing government business. In recent weeks, South African police have raided properties owned by the Guptas and frozen some of their assets as part of an expanding investigation into what officials have called their "capture" of the South African state.

Mr. Zuma, who stepped down as president last month, and the Guptas, which once controlled a corporate empire stretching from media to mining, have denied wrongdoing.

The multipronged scandal has dragged in several multinational companies, including accounting firm KPMG and consultancy McKinsey & Co. While KPMG and McKinsey have said they regret doing business with the Guptas or companies associated with the family, SAP was the first international corporation to say its actions may have broken U.S. anticorruption laws.

SAP said Thursday that between December 2014 and June 2017 it paid a total of 112.7 million rand ($9.5 million) to three companies tied to the Guptas as "commission" for contracts with South Africa's state-owned rail and port operator, Transnet, and state power company Eskom. In October, SAP, which is listed in the U.S. and Germany, said it discovered 94 million rand in payments made between December 2015 and November 2016.

Philipp Klarmann, head of investigations and anticorruption at SAP, said the company was in constant contact with U.S. authorities, which have asked for documents and indicated that they want to question individuals tied to the South Africa payments. But he said that it was too early to say whether SAP could face fines or other sanctions over its behavior in South Africa. "We have decided not to account for these matters at this point," Mr. Klarmann said.

Eskom, which installed a new board and management in January, said it was also investigating the payments made by SAP to the Gupta companies.

Pressure on the Guptas and their suspected collaborators has escalated since Cyril Ramaphosa took over as president from Mr. Zuma last month. South African police have declared Ajay Gupta, one of the three brothers at the center of the family business, a fugitive after failing to hand himself over to police and arrested eight alleged business partners. Mr. Gupta's lawyer has denied that his client was evading the law and that he was out of the country when he was summoned by police.

A commission tasked with investigating the allegations surrounding the Guptas and Mr. Zuma took up its work earlier this month.

Write to Gabriele Steinhauser at [e-mail]

(END) Dow Jones Newswires

March 08, 2018 09:06 ET (14:06 GMT)

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