Photographer: Akos Stiller/Bloomberg

U.S. Authorities Probe Germany's SAP as Gupta Scandal Escalates

Updated on
  • Investigation finds ‘misconduct’ by SAP’s S. African business
  • SAP, KPMG, McKinsey among those linked to Gupta allegations

Corruption allegations surrounding South Africa’s politically connected Guptas ensnared one of Germany’s biggest companies as SAP SE joined international businesses ranging from KPMG LLP to McKinsey & Co. in reporting links with the family.

The provider of compliance software said in a statement Thursday that it’s being investigated by the U.S. Department of Justice and the U.S. Securities and Exchange Commission after a probe into its South African business found misconduct in work related to the Guptas, who have strong links with President Jacob Zuma and his son.

An internal probe by law firm Baker McKenzie found that the Walldorf-based company paid Gupta-related businesses about 94 million rand ($6.6 million) in commission after receiving help to win contracts with two South African state-owned companies, SAP said.

The U.S. probe marks an escalation in the turmoil surrounding the Guptas, who are at the heart of one of South Africa’s biggest post-apartheid scandals. The Indian-born family have been accused of using their connections to win lucrative state contracts and influence the appointment of government ministers. The Guptas and Zuma deny wrongdoing.

While SAP didn’t find evidence of direct payments to government officials, or employees of government-owned Transnet SOC Ltd. and Eskom Holdings SOC Ltd., the company reported the situation to U.S. authorities responsible for enforcing the U.S. Foreign Corrupt Practices Act.

Leaked Emails

SAP suspended its South African management team after South Africa’s opposition Democratic Alliance party laid charges of corruption and money laundering against the firm after leaked emails were reported in local media. A similar internal probe by KPMG led the auditor to clear out its top regional management and led several clients to drop the company.

U.S. consultant McKinsey said this month that it didn’t follow its own procedures when carrying out work for power provider Eskom. South Africa’s Corruption Watch has said it could report the firm to the DoJ, while the FBI recently opened its own probe into U.S. links to the family, according to the Financial Times.

“Following SAP’s admission today, the police have an obligation to investigate fully and to leave no stone unturned,” the DA said in an emailed statement Thursday.

U.K. regulators are looking into whether HSBC Holdings Plc and Standard Chartered Plc facilitated money-laundering as a result of possible ties to the Guptas, while public relations firm Bell Pottinger LLP collapsed after being found to have run a racially divisive social media campaign for the family.

“We have reported misconduct to U.S. authorities, but we have not had any interaction with South African authorities,” SAP executive board member Adaire Fox-Martin told reporters in Johannesburg. “We have not yet made a decision if we will approach South African authorities.”

SAP made changes to its business practice in light of the findings. The company will stop paying sales commissions on public sector deals in countries with a Corruption Perceptions Index below 50, it said. South Africa’s rating is 45. SAP also started disciplinary proceedings against three employees.

While SAP’s statement initially sent shares down as much as 0.9 percent in Frankfurt trading, the stock has since rebounded, rising 1 percent to 96.45 euros as of 4:38 p.m. local time.

— With assistance by Paul Burkhardt, and Stefan Nicola

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