Microsoft Under Investigation Over Potential Bribery In Hungary
Microsoft Corp. (NASDAQ: MSFT) is reportedly under investigation by US authorities over sales of its software in Hungary being potentially linked to bribery and corruption. According to people familiar with the matter, the Justice Department and the Securities and Exchange Commission are looking into how Microsoft sold software to middleman firms that then sold those products to Hungarian government agencies in 2013 and 2014.
According to published reports, some of the middleman companies received discounts of as much as 30 percent from Microsoft on the software. The firms apparently did not pass along all of the discounts they received on the products, choosing to charge the government agencies much closer to full price. Investigators are probing whether the difference was used to pay bribes and kickbacks to government officials.
The reports state that Microsoft sold roughly $30 million annually in software to a group of small company owners during the years in question. Microsoft sales employees based outside of Hungary signed off on discounts. Microsoft is now saying that the discount decisions were based on misrepresentations by rogue Hungarian employees.
Microsoft said became aware of “potential wrongdoing” at its Hungarian operations in 2014. In a statement, Microsoft’s deputy general counsel, David Howard, said, “As soon as we became aware in 2014 of potential wrongdoing in our Hungarian subsidiary, we moved quickly to pursue a detailed investigation and hold people accountable. We fired four employees and terminated our business with four partners, and we’ve been defending ourselves against legal claims they raised as a result.”
If Microsoft is found to have been involved in wrong-doing, it would be a violation of the US Foreign Corrupt Practices Act. The law prohibits businesses from paying bribes to win or maintain business. The company has said it is cooperating with the Justice Department and SEC and has bolstered efforts to increase transparency about discounting.
This is not the first time Microsoft has faced these types of allegations. In 2013, US authorities reportedly investigated Microsoft’s relationship with business partners in China, Romania, Italy, Russia, and Pakistan over the same types of activities. It is unclear whether these investigations are on-going.