Microsoft accused of 'bribery and corruption'

Company's Hungarian sales operation is target of SEC probe, reports say

Microsoft is currently under investigation by the US Department of Justice and the SEC over allegations that the company may have engaged in bribery and corruption as part of its Hungarian sales operation, according to reports.

The federal government is looking into claims that the company may have conspired with resellers in order to use bribes to land government contracts in Hungary in 2013 and 2014, the Wall Street Journal reported.

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Sources told the paper that Microsoft provided some of its most popular software, such as products from the Microsoft Office productivity suite, to third-party companies in Hungary at rock-bottom prices. These resellers would then sell them on to government buyers at a huge mark-up, the sources stated, using some of the left-over cash to bribe government officials into accepting the contract.

The discounts offered to resellers were up to 30% in some cases, with Microsoft conducting around $30 million in sales to Hungarian third-party firms from 2012 to 2014. According to Microsoft, the discounts were signed off by sales staff who were not based in Hungary, stating that these employees were misled by corrupt individuals within its Hungarian operation.

The company told IT Pro that it mounted its own investigation into the allegations in 2014, after it learned of "potential wrongdoing" in its regional operation. This investigation led to the termination of four employees, including country manager Istvan Papp, although Papp told the Journal that he had "received only positive feedback from the management". Relationships were also severed with four of the company's Hungarian partners. Microsoft told the Wall Street Journal that it is "cooperating with the Justice Department and SEC".

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"We're committed to ethical business practices and won't compromise these standards," a Microsoft Spokesperson told IT Pro.

Although the alleged violations were committed overseas, the US Foreign Corrupt Practises Act gives American authorities the power to pursue corruption committed by US companies - such as bribing customers to secure business - in other territories.

Microsoft has previously found itself under investigation numerous times for similar issues. In 2013, the DoJ and SEC also investigated Microsoft partners in Pakistan, Russia, Italy, China and Romania over claims of kickbacks for government contracts Its Czech Republic business was also investigated by the SEC for bribery, and Microsoft's ex-country manager for the Czech Republic Clin Tatomir is set to go on trial next month, with Czech authorities accusing him of helping third-party resellers of Microsoft software gain an unfair advantage through unspecified corrupt means.

"Beginning in 2014 we also developed a comprehensive response to concerns we had around how partners and resellers were using discounts," Microsoft told IT Pro. "Since then we've implemented a new global program to ensure transparency around discounts for government customers."

"This requires partners to pass on discounts to these customers and ensures a formal confirmation from the customer that they are aware of the discount. In addition, our contracts with partners mandate compliance with local and U.S. law."

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