The US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) are investigating claims that Microsoft’s business partners accepted bribes in China, Italy, and Romania in return for software contracts. The investigations are at a preliminary stage only, and neither Microsoft nor any of its business partners have been accused of wrongdoing. Indeed, Microsoft says it is investigating the claims as well.
“We take all allegations brought to our attention seriously, and we cooperate fully in any government inquiries,” Microsoft Vice resident and Deputy General Counsel John Frank wrote in a blog post addressing the preliminary investigation. “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.”
The original source here is certainly interesting: According to a Wall Street Journal report, an anonymous tipster in China told US investigators last year that “an executive of Microsoft's China subsidiary instructed the tipster to offer kickbacks to Chinese officials in return for signing off on software contracts.” But Microsoft had conducted its own 10-month internal investigation into this very issue, concluding in 2010 that there was no evidence of wrongdoing.
And that tipster? Turns out his own contract with Microsoft China ended in 2008 after “a labor dispute.” The whistleblower could very well have an axe to grind.
Indeed, Mr. Frank suggests that while the matters raised here are important, it’s “also important to remember that it is not unusual for such reviews to find that an allegation was without merit … In a company of our size, allegations of this nature will be made from time to time. It is also possible there will sometimes be individual employees or business partners who violate our policies and break the law. In a community of 98,000 people and 640,000 partners, it isn’t possible to say there will never be wrongdoing … When we receive allegations, [we] investigate them fully and take appropriate action. We take that responsibility seriously.”
The Wall Street Journal report notes that the DOJ and SEC are also examining Microsoft’s “relationship with certain resellers and consultants in Romania and Italy,” citing “people familiar with the matter.” The Romania Ministry of Communications has responded that the allegations are “inconsistent” with its records. In Italy, Microsoft is accused of “lavishing gifts and trips” on officials in return for government business.
The Wall Street Journal report has of course triggered an avalanche of news about the investigations and Microsoft’s business practices, even though it notes that “such investigations can end with no charges being filed … The government hasn't accused Microsoft or any of its business associates of wrongdoing.” As it turns out, these kinds of cases are “fairly common” among US companies, Reuters notes, with hundreds of such cases launched over the past three years. These include a 2011 case against IBM in which it paid $10 million to resolve SEC charges over improper gifts to government officials in South Korea and China.
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