Microsoft is under investigation for possible corruption and bribery to increase its software sales in Hungary. According to WSJ, the SEC and Justice Department of the US are proceeding with the investigation.
The Foreign Corrupt Practices Act (FCPA) of 1977 empowers the US government officials to inquire into the payments made by firms based in the US, to officials in other countries as well as governments. Bribery of all forms is prohibited under this. If it were to occur, the law allows prosecution of those responsible for engaging in corrupt practices.
A spokesperson for Microsoft conceded that the company got to know about possible corrupt practices at its subsidiary in 2014. They further revealed to Fortune that upon conducting an internal investigation soon after, they “fired four employees and terminated our business with four partners, and we’ve been defending ourselves against legal claims they raised as a result.”
The Wall Street Journal reports that those fired include Istvan Papp, the company’s country manager for Hungary. When contacted by the Journal, Papp responded by saying that any feedback that he got from the management of the company was positive. He was not willing to give further comments on the situation. Meanwhile, the company did not immediately respond to a request made by Fortune.
The allegations say that Microsoft software was sold to companies that served as middlemen at a good discount. These companies then sold them at its original price and sold them to the government of Hungary. A part of the profit accrued through the transaction was then passed on to the people well placed in the administrative machinery of Hungary.
Microsoft tries to defend itself by saying that the practice followed to make sales was reformed in 2014. The customers from the government are now made more aware of the discounts. This is achieved when those partners who pass on the discount to the customer makes sure that the customer is aware of the discount, through a formal confirmation. The company went on to assert that they strictly enforce compliance with the local laws and laws of the US while framing its contract. Technology which is based in artificial intelligence is also employed to recognize any compliance risk in the contract.
Probes faced by the company have gone up over the past few years. The company has faced probes for questionable sales arrangement in many countries. This has been mainly reported in developing countries. Authorities in the US looked into bribery allegations against the company in Italy, Pakistan, China, Romania, and Russia in 2013.
US President Donald Trump told CNBC in 2012 that if bribery cases of US-based firms in other countries are pursued by the US government, it is a big disadvantage for them. He termed the law horrible and said that it needs to be changed. The President’s company, The Trump Organization, which manages properties and licenses his name, has also engaged in such practices which can be investigated by authorities in the US.
However, Jeff Sessions, the Attorney General in April 2017 held that FCPA would continue to be strongly enforced. Hence roll back of FCPA is highly unlikely.