SAP Settles TomorrowNow Criminal Charges for $20 Million

September 19, 2011 Alex Woodie

SAP paid $20 million in fines and plead guilty in federal court last week in the criminal case over TomorrowNow’s illegal downloading of support information from Oracle. In exchange for its plea and the fines, the Department of Justice dropped its criminal case against SAP and its now defunct TomorrowNow subsidiary. Oracle’s civil case against SAP is still under appeal.

SAP plead guilty to 11 felony counts of unauthorized access of Oracle’s computer system and one felony count of criminal copyright infringement. It will pay the fine of $20 million to Oracle and be under probation for three years. The penalties applied only to the corporation, as no individuals were ever charged. SAP and TomorrowNow–which no longer provides services and has just a handful of employees–are also obligated to cooperate with any further investigation.

The plea was formally made by Mark White, SAP’s chief financial officer of global customer operations, and accepted on Wednesday by U.S. District Judge Phyllis Hamilton in the U.S. District Court, Northern District of California, which is located in Oakland. While Oracle was offered to have a representative address the court last week, it elected not to send anybody.

The criminal complaint against SAP and TomorrowNow was filed by the U.S. Attorney’s office in San Francisco on September 8. Charges by the federal prosecutors came after a multi-year investigation.

U.S. attorneys allege that TomorrowNow employees used the log-in credentials of legitimate Oracle customers running PeopleSoft Enterprise, J.D. Edwards World and EnterpriseOne, and Siebel CRM software to improperly gain access to maintenance packs, payroll updates, and customer support forms that it could then use to support other customers. The attorneys say the log-in credentials of two JD Edwards EnterpriseOne customers–Merck & Co. and Yazaki North America–were used by TomorrowNow. Another two JD Edwards World customers–Metro Machine and Honeywell International–were listed in the complaint.

According to the complaint, TomorrowNow employees made at least 6,189 copies of PeopleSoft Enterprise, at least 29 copies of J.D. Edwards World or EnterpriseOne, and at least 31 copies of Siebel software. About 350 companies ended their Oracle support contracts and switched to TomorrowNow as a result of TomorrowNow’s actions, SAP has admitted.

While the criminal case against SAP and its defunct TomorrowNow operation is closed, the civil case is still open. Last year, a jury awarded Oracle $1.3 billion in damages following a four-week trial. However, Judge Hamilton reduced that figure to $272 million two weeks ago. Oracle is in the process of appealing that decision, and a new civil trial is likely.

Oracle brought its suit against TomorrowNow in 2007. SAP, which acquired the provider of third-party support for enterprise software in 2005, admitted to Oracle’s accusations in court in late 2007, and subsequently shut down the Texas-based TomorrowNow operation in 2008. However, SAP fought the scope of Oracle’s alleged damages, which Oracle claimed could be more than $3 billion. SAP argued that damages in the range of $28 million to $41 million were appropriate.