Harry Cassin Publisher and Editor

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Report: Microsoft sales practices in Hungary under investigation

The Wall Street Journal reported Thursday that the DOJ and SEC are investigating potential bribery and corruption involving the sale of Microsoft products in Hungary.

Microsoft said in a statement to the Journal that it "moved quickly to investigate itself after it became aware of 'potential wrongdoing' at its Hungarian operations in 2014."

The DOJ and SEC are looking at "how Microsoft sold software such as Word and Excel to middleman firms in Hungary that then sold those products to government agencies there in 2013 and 2014," the WSJ's Drew Hinshaw and Jay Greene said.

Microsoft has already disclosed FCPA-related investigations and its cooperation with U.S. enforcement at least three times, according to FCPA Tracker.

In its April 27, 2017 Form 10-Q, Microsoft said:

From time to time, we receive inquiries from authorities in the U.S. and elsewhere and reports from employees and others about our business activities outside the U.S. and our compliance with Anti-Corruption Laws. Specifically, we have been cooperating with authorities in the U.S. in connection with reports concerning our compliance with the Foreign Corrupt Practices Act in various countries.

(italics added)

The same or similar disclosures also appeared in Microsoft's January 26, 2017 Form 10-Q and its July 28, 2016 Form 10-K, according to FCPA Tracker.

Before Thursday, Microsoft hadn't specifically said sales activities in Hungary were under review.

In 2013, the company didn't deny a Wall Street Journal report that the DOJ and SEC were investigating a whistleblower complaint about alleged bribes by business partners to officials in Italy, Romania, and China.

So far, the DOJ and SEC haven't brought enforcement actions related to the earlier investigations.

Thursday's Wall Street Journal report, citing "people familiar with the matter," said Microsoft sold some of its products to intermediaries "at steep discounts, and then these firms sold the products to the Hungarian government at closer to full price."

"Investigators are probing whether the middleman companies used the difference to pay bribes and kickbacks to government officials," according to the Journal's sources.

Microsoft told the WSJ Thursday that it fired four employees, including the country manager, "related to its probe in Hungary" and "terminated business relationships with four partners in Hungary."


Richard L. Cassin is the publisher and editor of the FCPA Blog.