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Microsoft Bribe Probe Reaches into Pakistan, Russia Deals

September 12, 2013 at 12:07 pm | News Desk


Microsoft Bribe Probe Reaches into Pakistan, Russia Deals

Justice Department Reviewing Allegations Involving Deals in Five Countries

A U.S. investigation into Microsoft Corp.’s relationships with business partners that allegedly bribed foreign officials in return for contracts includes activity in Russia and Pakistan, a sign that the probe is wider reaching than previously known, according to people familiar with the matter.

The Wall Street Journal reported this year lawyers from the U.S. Justice Department and the Securities and Exchange Commission had been conducting a preliminary investigation into kickback allegations made by a former Microsoft representative in China, as well as the company’s relationships with certain resellers and consultants in Romania and Italy.


In Russia, an anonymous tipster told Microsoft that resellers of its software allegedly funneled kickbacks to executives of a state-owned company to win a deal, the people familiar with the matter said. In Pakistan, a tipster alleged that Microsoft authorized a consulting firm to pay for a five-day trip to Egypt for a government official and his wife in order to win a tender, the people familiar with the matter said. The two contacted Microsoft directly in the last eight months, the people said.

The government hasn’t accused Microsoft or any of its business associates of wrongdoing. Such investigations can end with no charges being filed. The Justice Department and Securities and Exchange Commission declined to comment.

John Frank, Microsoft vice president and deputy general counsel, said the company takes all allegations brought to its attention seriously and cooperates fully in any government inquiries. “We sometimes receive allegations about potential misconduct by employees or business partners and we investigate them fully regardless of the source,” Mr. Frank said in a statement. “We also invest heavily in proactive training, monitoring and audits to ensure our business operations around the world meet the highest legal and ethical standards.”

The probe is one of dozens being conducted by U.S. officials under the Foreign Corrupt Practices Act, a 1977 law that prohibits U.S. traded companies from paying bribes to foreign officials. The law also holds companies liable for improper payments made by others on their behalf.

Microsoft has opened an internal investigation, according to people familiar with the matter. Companies often spend millions of dollars investigating themselves for potential violations of the FCPA, then turn over the results to the government in the hope of getting lighter penalties or none at all.

One tipster emailed Microsoft in January alleging executives at Microsoft’s Pakistan operations paid for a December 2009 trip for a Punjab Provincial government official and his wife to win a three-year contract to supply the government with its Microsoft Office software, according to documents reviewed by The Wall Street Journal. The trip, which was allegedly booked by a travel consulting firm on behalf of Microsoft, included business class airfare and a stay at a luxurious hotel, the tipster alleged in the documents. According to the tipster, Microsoft won the partnership, worth roughly $9 million, three months later. The Punjab Government didn’t respond to a request for comment.


Another tipster mailed allegations to Microsoft concerning its Russian branch in March, said a person familiar with the matter. That tipster alleged that a Microsoft reseller paid kickbacks to executives at a state-controlled telecommunications company for a contract, according to documents reviewed by the Journal.

Efforts to reach Russian officials were unsuccessful.

A whistleblower program at the SEC, established in the summer of 2010 with the passage of Dodd-Frank, provides cash incentives for employees to blow the whistle on securities violations, including breaches of the FCPA. If the SEC gets involved and finds wrongdoing after a whistleblower complaint, a tipster stands to gain as much as 30% of any monetary sanction the agency recovers.

Courtesy: The Wall Street Journal




News Desk

Economic Affairs Editor

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