“A dark pit of non-disclosure and secrecy”. A “serial lawbreaker” rewarded with lavish Australian Government contracts. Forensic accountant Jeffrey Knapp takes the long-handle to tech giant Oracle, proving yet again – and in the lead-up to the Inquiry into Audit Standards and Big Four conflicts – that audit standards and the policing of multinational corporations are a joke.
In Ancient Greece, people visited the Oracle of Delphi handing over gold to ask about the future and receive prophesies. The Oracle of Delphi was revered because it was perceived to be independent and beyond reproach.
Two Oracles: one revered the other a bad joke
Around 2,500 years after the zenith of the Oracle of Delphi, politicians and bureaucrats in Canberra are handing over gold to the Oracle Corporation for data services. Unlike the Oracle of Delphi though, the Oracle Corporation has no credibility. It routinely flouts Australian laws for financial reporting and income tax.
Despite being a serial law breaker, the Oracle Corporation is the beneficiary of government contracts from the likes of the Department of Finance, the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO). Oracle is currently a key player in Australian Visa Processing Pty Ltd, one of two consortia bidding for the privatisation of Australia’s visa system.
They key management personnel at Oracle Corporation and their handsomely rewarded lawyers, Baker & McKenzie, and accountants, Ernst & Young, surely can’t believe their luck. Oracle has a habit of breaking the law right under the nose of ASIC but was recently signed up by the regulator for a multi-million dollar contract.
Oracle cheats on Australian income tax but boasts the ATO on its client list. Oracle treats Australian laws with contempt but has various government departments fawning all over it. Imagine a shoplifter stealing from Woolworths and then being rewarded with employment shifts at the store on double time. This is the story of Oracle in Australia.
See data in new ways by not seeing it all
According to its website, Oracle Corporation’s mission is “to help people see data in new ways, discover insights, unlock endless possibilities.”
In the case of Oracle’s financial reporting in Australia, the mission statement translates as follows: to help people see data in new ways such as: (1) not seeing financial reports at all; (2) seeing financial reports only when the data is stale or years old; and (3) seeing a fraction of the financial affairs, Enron-style, in unconsolidated accounts.
There is nothing for the public or the ATO to discover in Oracle’s financial reports. There is nothing to unlock. There is only useless financial information and opaqueness. The endless possibilities are a dark pit of non-disclosure and secrecy.
Oracle’s record of endless illegality
In April 2005, Oracle reorganised its Australian corporate group structure to hide things. Oracle Consolidation Australia Pty Ltd and Oracle Australia Holdings Pty Ltd were incorporated and became holding companies for Oracle Corporation Australia Pty Limited.
Over the course of the next 14 years, Oracle has amassed 42 breaches of the Companies Act for failing to file a timely annual financial report with ASIC as shown in the table below. As shown in the table, Oracle is a bad corporate citizen in Australia. Oracle withholds legally required accounting information for years at a time.
Make no mistake, Oracle’s withholding of accounting information is tax-driven illegality. Annual financial reports are withheld because it doesn’t suit the management of Oracle’s tax affairs to release audited accounting information as and when required by the law.
Oracle’s 42 Breaches of the Corporations Act and Counting
Oracle discovers Enron accounting
After the 2005 restructure, Oracle decided that it no longer had to be accountable for its financial affairs in Australia. It took a leaf out of the Enron playbook and stopped including the financial effects of all transactions and events. It ceased to produce consolidated financial statements for its Australian corporate group that complied with all accounting standards.
When multinationals do not produce consolidated accounts for the entirety of the financial affairs of the ultimate Australian holding company, it is tax-driven chicanery. Oracle confines the auditors to a piecemeal analysis of its financial affairs and keeps the ATO and the public in the dark.
The ultimate holding company in Australia, Oracle Consolidation Australia Pty Ltd, produces useless financial reports as a stand-alone entity.
Oracle and its auditor, Ernst & Young, claim these financial reports are only intended to be used by the members, that is, the Oracle Corporation itself. These accounts are junk for anyone else. But if they are not intended for public consumption, then why does Australian law require the financial reports to be placed on a public register?
The directors report of Oracle Consolidation Australia Pty Ltd for 2018 states that the principal activity of the company is to be a holding company. That the principal activity of a company at the head of a billion dollar Australian business is to be a company … sounds like someone taking the piss. The same could be said for all multinational clients of the Big Four audit firms that ignore their financial reporting obligations in Australia and cheat on income tax.
A final prophesy
News of Oracle’s law-breaking may test the stomach grease of the average Australian citizen but the law-breaking will probably go on and on because – when it comes to equality before the law – Oracle is more equal than the rest of us.