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Microsoft Corp. is being investigated by the U.S. Securities and Exchange Commission and the Department of Justice over potential bribery and corruption allegations connected to software sales in Hungary, the Wall Street Journal reported Thursday.
According to “people familiar with the matter” referenced in the report, the investigation is probing how Microsoft sold software to middleman firms in Hungary that then sold those products to government agencies in 2013 and 2014.
Microsoft is not being accused of partaking in bribery. The allegation is that Microsoft sold some of its products to middlemen firms at steep discounts and those firms subsequently sold the software to the Hungarian government at close to the full price, with those sellers potentially using the difference to pay bribes and kickbacks to government officials.
The report noted that Microsoft investigated itself when it became aware of the practice, ceased providing the discounted software to the middlemen involved and also fired four employees, including its then-country manager Istvan Papp.
Microsoft is being investigated for breaches of the U.S. Foreign Corrupt Practices Act, a law that prohibits U.S. businesses from paying bribes to win or maintain business wherever they operate, even in countries where bribery is commonplace. The law was also designed to address accounting transparency requirements under the Securities Exchange Act of 1934 in that bribes are usually under the table and hence not recorded. By making bribery illegal, in theory business accounts are more accurate.
This isn’t the first time Microsoft has been investigated for breaches of the act. The Justice Department previously looked into similar claims in Microsoft offices in Russia, Pakistan, China, Italy and Bulgaria.
In the Czech Republic, Microsoft’s former country manager, Călin Tatomir, is awaiting trial on charges of money laundering and being complicit in the abuse of public office while serving as the company’s country manager in Romania.
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