Microsoft accused of spending millions on bribes to seal business deals
(2022/03/25)
- Reference: 1648235391
- News link: https://www.theregister.co.uk/2022/03/25/microsoft_accused_of_corrupt_business/
- Source link:
Yasser Elabd, who formerly served as a senior director at Microsoft, has accused the Windows giant of paying illegal bribes to close business deals in the Middle East and Africa.
In [1]a post published on whistleblowing platform Lioness this week, Elabd alleged how in 2016 he challenged a dubious $40,000 payment to make a sale in a country in Africa and was then retaliated against and ultimately fired in 2018.
Elabd said in 2020 he learned more about the alleged scheme when a former colleague in Saudi Arabia began forwarding him emails and documentation that indicated corrupt practices.
[2]
"Examining an audit of several partners conducted by PricewaterhouseCoopers, I discovered that when agreeing to terms of sale for a product or contract, a Microsoft executive or salesperson would propose a side agreement with the partner and the decision maker at the entity making the purchase," Elabd claimed.
[3]
[4]
"This decision maker on the customer side would send an email to Microsoft requesting a discount, which would be granted, but the end customer would pay the full fee anyway. The amount of the discount would then be distributed among the parties in cahoots: the Microsoft employee(s) involved in the scheme, the partner, and the decision maker at the purchasing entity – often a government official."
Microsoft three years ago was fined by the US Justice Department and the US Securities and Exchange Commission for this very behavior in other countries.
[5]
In 2019, Microsoft agreed to [6]pay $8.7m in criminal penalties to resolve bribery charges related to business practices in Hungary. In a related investigation, the company also agreed to [7]pay the SEC $24m that year to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) through subsidiaries in Hungary, Thailand, Saudi Arabia and Turkey, and criminal charges related to conduct in Hungary.
[8]Bribery charges against Apple's global security boss dismissed in iPads-for-gun-permits case
[9]Former Cisco exec jailed for fraud, dodging taxes
[10]Former tech CIO jailed for setting up £475k backhander scam with IT outsourcing firm
[11]Ericsson report details how it paid off Islamic State
The FCPA "generally prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business," the SEC explained on its website.
According to the World Bank, [12]about 16 percent of companies as a global average experienced at least one bribery request in 2020. In many countries, that figure is significantly higher. In the Syrian Arab Republic, data from 2009 indicates about 69.6 percent of businesses get hit up for bribes; in Cambodia in 2016 about 64.7 percent of companies received at least one bribery request. In Yemen in 2013, the figure was 64.3 percent.
As the SEC described the situation at the time, Microsoft offered discounts on software licenses to its partners, who instead of passing the discounts along to Microsoft's government customers used the discounts to fund payments to government officials to have sales deals approved. The US financial watchdog also said Microsoft's subsidiaries offered improper travel and gifts for foreign government officials and non-government customers through a slush fund supplied by Microsoft's partners and resellers.
Elabd said he's aware of five other Microsoft employees who were either fired or forced to resign for reporting finance irregularities. And he said the SEC and the Department of Justice have declined to investigate despite the evidence submitted as part of his whistleblower complaint.
[13]
"They acknowledged my evidence (which I submitted three times) yet did not take up the case, claiming that the current pandemic has prevented them from gathering more evidence from abroad — even though I have already provided documentation that I believe shows Microsoft is in breach of the 2019 agreement and is still participating in corrupt business practices in direct violation of US law," he wrote.
They acknowledged my evidence yet did not take up the case, claiming that the current pandemic has prevented them
The Register asked the SEC to confirm this. An SEC spokesperson replied, "The SEC does not comment on the existence or nonexistence of a possible investigation."
Elabd contends that Microsoft is aware of what's going on with its partners and is deliberately looking the other way.
"In 2013, it was discovered internally that a member of the sales team managing one country’s government contracts was taking money from the business investment fund for a 'pilot program' at a company in another country – but the company was his own, and the program was fake," he claimed. "HR and legal department executives confronted the employee, who threatened to expose the scale of corruption inside Microsoft; he then resigned and joined a rival company the next day."
In Protocol's [14]report on Elabd's post, that last line reads, "He resigned and joined Oracle the next day."
Elabd goes on to allege how later, at an annual meeting in Turkey, Microsoft personnel said no action was taken against the grifting employee because the punishment for that sort of crime in the employee's home country was so severe.
"In my estimation, a minimum of $200 million each year goes to Microsoft employees, partners, and government employees," he wrote. "Experience leads me to believe that 60–70 percent of the company’s salespeople and managers in the Middle East, Africa, and parts of Europe are receiving these payments."
Following the 2019 settlement announcements, Microsoft published a [15]blog post from president Brad Smith expressing disappointment with those involved and declaring the company's support for ethical business practices.
"We were deeply disappointed and embarrassed when we first learned about these events several years ago, and we hope that all of the steps we’ve since taken, including today’s settlement, send a strong message," Smith said. "As a company, we do not tolerate employees and partners who willfully break policies that go to fundamental issues of business integrity."
Asked to comment on Elabd's allegations, Microsoft emailed a statement from Becky Lenaburg, VP and deputy general counsel of compliance and ethics.
"We are committed to doing business in a responsible way and always encourage anyone to report anything they see that may violate the law, our policies, or our ethical standards," said Lenaburg. "We believe we’ve previously investigated these allegations, which are many years old, and addressed them. We cooperated with government agencies to resolve any concerns." ®
Get our [16]Tech Resources
[1] https://www.lioness.co/post/microsoft-is-using-illegal-bribes-in-the-middle-east-and-africa-why-is-the-sec-turning-a-blind-eye
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.justice.gov/opa/pr/hungary-subsidiary-microsoft-corporation-agrees-pay-87-million-criminal-penalties-resolve
[7] https://www.sec.gov/enforce/34-86421-s-0
[8] https://www.theregister.com/2021/06/02/apple_security_boss_bribery_dismissed/
[9] https://www.theregister.com/2021/08/31/former_cisco_exec_jailed/
[10] https://www.theregister.com/2022/02/03/brian_chant_jailed_six_years/
[11] https://www.theregister.com/2022/02/28/ericsson_isis_bribes/
[12] https://data.worldbank.org/indicator/IC.FRM.BRIB.ZS?end=2020&most_recent_value_desc=true&start=2020
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.protocol.com/workplace/microsoft-corruption-whistleblower-bribery
[15] https://blogs.microsoft.com/on-the-issues/2019/07/22/microsoft-president-brad-smith-email-to-employees-there-is-no-room-for-compromise-when-it-comes-to-ethical-business-practices/
[16] https://whitepapers.theregister.com/
In [1]a post published on whistleblowing platform Lioness this week, Elabd alleged how in 2016 he challenged a dubious $40,000 payment to make a sale in a country in Africa and was then retaliated against and ultimately fired in 2018.
Elabd said in 2020 he learned more about the alleged scheme when a former colleague in Saudi Arabia began forwarding him emails and documentation that indicated corrupt practices.
[2]
"Examining an audit of several partners conducted by PricewaterhouseCoopers, I discovered that when agreeing to terms of sale for a product or contract, a Microsoft executive or salesperson would propose a side agreement with the partner and the decision maker at the entity making the purchase," Elabd claimed.
[3]
[4]
"This decision maker on the customer side would send an email to Microsoft requesting a discount, which would be granted, but the end customer would pay the full fee anyway. The amount of the discount would then be distributed among the parties in cahoots: the Microsoft employee(s) involved in the scheme, the partner, and the decision maker at the purchasing entity – often a government official."
Microsoft three years ago was fined by the US Justice Department and the US Securities and Exchange Commission for this very behavior in other countries.
[5]
In 2019, Microsoft agreed to [6]pay $8.7m in criminal penalties to resolve bribery charges related to business practices in Hungary. In a related investigation, the company also agreed to [7]pay the SEC $24m that year to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) through subsidiaries in Hungary, Thailand, Saudi Arabia and Turkey, and criminal charges related to conduct in Hungary.
[8]Bribery charges against Apple's global security boss dismissed in iPads-for-gun-permits case
[9]Former Cisco exec jailed for fraud, dodging taxes
[10]Former tech CIO jailed for setting up £475k backhander scam with IT outsourcing firm
[11]Ericsson report details how it paid off Islamic State
The FCPA "generally prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business," the SEC explained on its website.
According to the World Bank, [12]about 16 percent of companies as a global average experienced at least one bribery request in 2020. In many countries, that figure is significantly higher. In the Syrian Arab Republic, data from 2009 indicates about 69.6 percent of businesses get hit up for bribes; in Cambodia in 2016 about 64.7 percent of companies received at least one bribery request. In Yemen in 2013, the figure was 64.3 percent.
As the SEC described the situation at the time, Microsoft offered discounts on software licenses to its partners, who instead of passing the discounts along to Microsoft's government customers used the discounts to fund payments to government officials to have sales deals approved. The US financial watchdog also said Microsoft's subsidiaries offered improper travel and gifts for foreign government officials and non-government customers through a slush fund supplied by Microsoft's partners and resellers.
Elabd said he's aware of five other Microsoft employees who were either fired or forced to resign for reporting finance irregularities. And he said the SEC and the Department of Justice have declined to investigate despite the evidence submitted as part of his whistleblower complaint.
[13]
"They acknowledged my evidence (which I submitted three times) yet did not take up the case, claiming that the current pandemic has prevented them from gathering more evidence from abroad — even though I have already provided documentation that I believe shows Microsoft is in breach of the 2019 agreement and is still participating in corrupt business practices in direct violation of US law," he wrote.
They acknowledged my evidence yet did not take up the case, claiming that the current pandemic has prevented them
The Register asked the SEC to confirm this. An SEC spokesperson replied, "The SEC does not comment on the existence or nonexistence of a possible investigation."
Elabd contends that Microsoft is aware of what's going on with its partners and is deliberately looking the other way.
"In 2013, it was discovered internally that a member of the sales team managing one country’s government contracts was taking money from the business investment fund for a 'pilot program' at a company in another country – but the company was his own, and the program was fake," he claimed. "HR and legal department executives confronted the employee, who threatened to expose the scale of corruption inside Microsoft; he then resigned and joined a rival company the next day."
In Protocol's [14]report on Elabd's post, that last line reads, "He resigned and joined Oracle the next day."
Elabd goes on to allege how later, at an annual meeting in Turkey, Microsoft personnel said no action was taken against the grifting employee because the punishment for that sort of crime in the employee's home country was so severe.
"In my estimation, a minimum of $200 million each year goes to Microsoft employees, partners, and government employees," he wrote. "Experience leads me to believe that 60–70 percent of the company’s salespeople and managers in the Middle East, Africa, and parts of Europe are receiving these payments."
Following the 2019 settlement announcements, Microsoft published a [15]blog post from president Brad Smith expressing disappointment with those involved and declaring the company's support for ethical business practices.
"We were deeply disappointed and embarrassed when we first learned about these events several years ago, and we hope that all of the steps we’ve since taken, including today’s settlement, send a strong message," Smith said. "As a company, we do not tolerate employees and partners who willfully break policies that go to fundamental issues of business integrity."
Asked to comment on Elabd's allegations, Microsoft emailed a statement from Becky Lenaburg, VP and deputy general counsel of compliance and ethics.
"We are committed to doing business in a responsible way and always encourage anyone to report anything they see that may violate the law, our policies, or our ethical standards," said Lenaburg. "We believe we’ve previously investigated these allegations, which are many years old, and addressed them. We cooperated with government agencies to resolve any concerns." ®
Get our [16]Tech Resources
[1] https://www.lioness.co/post/microsoft-is-using-illegal-bribes-in-the-middle-east-and-africa-why-is-the-sec-turning-a-blind-eye
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.justice.gov/opa/pr/hungary-subsidiary-microsoft-corporation-agrees-pay-87-million-criminal-penalties-resolve
[7] https://www.sec.gov/enforce/34-86421-s-0
[8] https://www.theregister.com/2021/06/02/apple_security_boss_bribery_dismissed/
[9] https://www.theregister.com/2021/08/31/former_cisco_exec_jailed/
[10] https://www.theregister.com/2022/02/03/brian_chant_jailed_six_years/
[11] https://www.theregister.com/2022/02/28/ericsson_isis_bribes/
[12] https://data.worldbank.org/indicator/IC.FRM.BRIB.ZS?end=2020&most_recent_value_desc=true&start=2020
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Yj5JovUlI5B2Ed82Qh7BqAAAAME&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.protocol.com/workplace/microsoft-corruption-whistleblower-bribery
[15] https://blogs.microsoft.com/on-the-issues/2019/07/22/microsoft-president-brad-smith-email-to-employees-there-is-no-room-for-compromise-when-it-comes-to-ethical-business-practices/
[16] https://whitepapers.theregister.com/
Mr Hebbles wasn’t ruthless enough
PriorKnowledge
They had the audacity to ask whether he would go 90 on a 70mph road and rather than sticking it to the man he kowtowed like a true saint.
From The Foundation...
Claverhouse
"We believe we’ve previously investigated these allegations, which are many years old
.
Please carry on.
If I'm Not Mistaken
aerogems
The US Foreign Corrupt Practices Act allows for an individual to sue a company like Microsoft on behalf of the government. If the guy's sure he's got the goods on Microsoft, that's always an option. Assuming he does indeed have the goods on MS, and what he alleges has actually been taking place, I do hope at some point Microsoft gets nailed to the wall for it.
Illegal Bribes?
Anonymous Coward
Does that mean that there are legal bribes?
Re: Illegal Bribes?
MrDamage
It's called "lobbying".
Re: Illegal Bribes?
Foxglove
In the UK we prefer cronyism, it benefits the wealthy without dragging the plebs in to the milieu.
And yes, in many countries bribes are effectively legal.
Maybe not actually legal, but think of breaking the speed limit on a UK motorway by 1 mph.
Nobody's going to bother going after you even if you are technically breaking the law.
Microsoft probably (definitely?) aren't alone anyway.
Re: Illegal Bribes?
Anonymous Coward
Yes, but those are called "campaign contributions"
Re: Illegal Bribes?
sreynolds
Well if you wrote them into the contract of terms of sale they could be lawful.
Scomo seems to think that he can legally bribe every voter with 250 bucks so that he can win an election.
Problem
HildyJ
As the article points out, Microsoft did this and admitted to criminal violations in 2019.
Hoping for new dirt on M$, I read through Elabd's post and clicked on every link. All of them were prior to 2019.
M$ may still have bad apples amongst its international network but Elabd doesn't give us any evidence of any of them.
The vagueness of the charges, the lack of recent evidence, and the fact that his complaint which he "submitted three times" is not linked to in the article makes me suspect this is a build-up to a wrongful termination lawsuit (for which I think he has a much better case).
Legal obligations
are all very well, but some people do not seem to believe that they should get in the way of doing business.
> "We are committed to doing business in a responsible way and always encourage anyone to report anything they see that may violate the law, our policies, or our ethical standards,"
I'm sure Mr Hebblethwaite of P&O would have said exactly the same thing a week ago. (https://www.bbc.co.uk/news/business-60872294 ). Of course Mr H does not seem to consider that the managers who let the situation get so bad that they felt the need to break the law should hold any responsibility for that. but maybe I do him a disservice and he's about to explain, while wearing sackcloth and ashes.
I remember a manager at one of my previous employers saying that if the rules did not allow him to do what he wanted, he "broke the rules". My response was that I prefer rules that work.