News

Feds Expand Microsoft Bribery Investigation to Pakistan, Russia

• By Gladys Rama
• August 22, 2013

Microsoft is cooperating with the U.S. government in its investigation into allegations that Microsoft business partners in several countries engaged in bribery to win contracts, the company said Wednesday.

The Wall Street Journal reported on the allegations in a pair of articles. In March, the paper reported that the U.S. Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) were investigating an anonymous tip from a former Microsoft representative in China, who alleged that a Microsoft executive in that country approved kickbacks to Chinese officials in exchange for Microsoft being awarded software contracts.

The March WSJ report noted, citing "people familiar with the matter," that federal investigators were also investigating bribery allegations against Microsoft resellers in Romania and Microsoft consultants in Italy.

On Wednesday, the WSJ reported that federal investigators have now extended their inquiry to include Microsoft partners in Pakistan and Russia.

"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," according to the WSJ report. "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 contract Microsoft won in the latter case was reportedly worth $9 million and was signed three months after the paid trip to Egypt.

The investigation into the Russia and Pakistan allegations is in the preliminary stage, the WSJ said, noting that no charges have yet been filed against Microsoft or its partners. The investigation is being conducted under the Foreign Corrupt Practices Act, which prohibits U.S. companies, as well as entities acting on those companies' behalf, from bribing foreign officials.

Microsoft has started its own internal investigation into the matter and is cooperating with federal investigators, the WSJ said.

In response to Wednesday's WSJ report, Microsoft Deputy General Counsel John Frank wrote in a blog post, "[W]e take every allegation seriously, and we cooperate fully in any government inquiries. Like other large companies with operations around the world, we sometimes receive allegations about potential misconduct by employees or business partners, and we investigate them fully, regardless of the source. 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."

Frank posted a similar response in March after the WSJ's first report regarding bribery allegations in China, Romania and Italy.

Microsoft employs 170 people specifically to investigate reports of compliance and policy breaches, in addition to contracting with outside law firms, according to Frank.