U.S. Authorities Investigating Microsoft Over Allegations of Bribery

U.S. authorities are investigating Microsoft Corp over the possible corruption and bribery related to its software sales in Hungary said people close to the situation.

The investigation comes following a number of probes of a similar nature into business partners of Microsoft that surfaced five years ago in five other nations. Earlier in the current decade Microsoft pushed to expand in several emerging markets, and in middle-income, smaller nations such as Hungary. In certain cases the bets by Microsoft turned into reputational and legal challenges.

The U.S. Securities and Exchange Commission and the Justice Department are probing into the way Microsoft sold its software like Word and Excel to the middleman companies in Hungary.

Some products were sold by Microsoft to intermediaries at very steep discounts and those firms in turn sold the same products to the government of Hungary at prices close to full price, said the people familiar with the situation.

Investigators have been probing whether the intermediary companies uses the prices differences to pay for kickbacks and bribes to officials in the government.

Microsoft has said it moved rapidly to carry out an investigation itself when it became aware of any possible wrongdoing at its operations in Hungary during 2014. The company said it was cooperating with the Department of Justice in its investigation.

Microsoft has fired four of its employees following its probe four years ago in Hungary, including Istvan Papp its country manager. In addition, Microsoft said that in 2017 it ended business relationships that it had with four partners in the country, saying the four had violated company policies. Microsoft said has since bolstered its efforts to increase transparency of discounting.

Papp has said that he was part of the Microsoft family and that he only received positive feedback from management.

The United States Foreign Corrupt Practices Act prohibits businesses from paying out bribes in order to win or keep business.

Many large companies, including Microsoft, have put processes into place that solicit internal whistleblower complains that report any possible violations to corresponding federal agencies. In several instances investigators from federal agencies do not find wrongdoing after starting to scrutinize allegations.

Seven out of the 10 largest fines in the 41-year existence of the FCPA were imposed during the past five years.

The SEC, since 2010, has rewarded whistleblowers with as much as 30% of a fine imposed which encourages employees to report any wrongdoing.

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