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August 24, 2018

Microsoft Bribery Probe: US Officials Investigating

Allegations date back to 2013-2014

By CBR Staff Writer

Microsoft is being investigated by US authorities over accusations of corruption and bribery surrounding the sale of company software in Hungary, according to a report in the Wall Street Journal published late Thursday.

The US Justice Department and the Securities and Exchange Commission (SEC) are both reported to be investigating the circumstances surrounding the manner in which Microsoft sold software to middleman companies in Hungary in 2013 and 2014.

microsoft briberyThe allegations are that Microsoft sold software such as Word and Excel to these middlemen firms at a large discount. The firms then sold the software on to government agencies at full price. The key point in the investigation is whether or not the money made from the resale was used to bribe Hungarian officials.

Microsoft deputy general counsel David Howard told the WSJ that the company is cooperating with the Justice Department and the SEC. He also emphasised that the company reacted quickly in 2014 when it became aware of “potential wrongdoing.”

“Leading Obstacle to Economic and Social Development”

Four people were fired over the incident in Hungary including Istvan Papp; Microsoft’s then Hungary country manager, the WSJ reports. The company also terminated business relationships with a number of partners they had established ties with in Hungary, citing violation of its company policies.

Micorsoft’s counsel Mr Howard told the Wall Street Journal that: “We’re committed to ethical business practices and won’t compromise these standards.”

The company’s code of conduct states: “Corruption is one of the leading obstacles to economic and social development. It distorts the rule of law and the institutional foundation on which Microsoft depends. Microsoft is committed to observing the standards of conduct set forth in the United States Foreign Corrupt Practices Act and the applicable Anti-Corruption and Anti-Money laundering laws of the countries in which we operate. Microsoft is also committed to continual improvement of the anti-bribery management system in place to assess, monitor, and manage potential bribery risks.”

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Microsoft Bribery Allegations: Serious Consequences

The investigation by the Justice Department and SEC could have serious consequence for Microsoft if they find evidence the company was involved in any from of corporate bribery. Under the United States Foreign Corrupt Practices Act enterprises are strictly forbidden from paying any form of bribe in order to expand their business.

Last year the US authority imposed a £752 million settlement against Sweden’s Telia Co. for violations involving bribery in Uzbekistan.

This is not the first time that US authorities have investigated Microsoft over bribery allegations. The Wall Street Journal report that in 2013 that Microsoft’s relationships with its partners in Italy, Russia and China.

John Frank Vice President & Deputy General Counsel of Microsoft at the time responded to the Wall Street Journal report by commenting in a blog that: “In a company of our size, allegations of this nature will be made from time to time.”

“It is also possible there will sometimes be individual employees or business partners who violate our policies and break the law. In a community of 98,000 people and 640,000 partners, it isn’t possible to say there will never be wrongdoing.”

“Our responsibility is to take steps to train our employees, and to build systems to prevent and detect violations, and when we receive allegations, to investigate them fully and take appropriate action. We take that responsibility seriously.”

Computer Business Review has contacted Microsoft for comment.

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