Microsoft Corporation paid the DOJ and SEC $25.3 million Monday to settle FCPA offenses related to its operations in Hungary, Saudi Arabia, Thailand, and Turkey.
A Microsoft subsidiary in Hungary called Microsoft Magyarorszag Kft. paid a criminal penalty of $8.75 million and entered into a three-year non-prosecution agreement with the DOJ.
Redmond, Washington-based Microsoft Corporation also disgorged $13.78 million to the SEC, plus prejudgment interest of $2.78 million.
Microsoft first disclosed the FCPA-related investigation in an SEC filing in July 2016, according to data from FCPA Tracker.
The SEC said Microsoft took remedial action and cooperated in the investigation. The company strengthened its internal accounting controls and compliance programs, took disciplinary action against four Microsoft Hungary employees, terminated four Hungarian licensing partners, and began using data analytics to help identify high-risk transactions, among other things.
In an internal administrative order (pdf), the SEC charged Microsoft Corporation with violating the FCPA’s books and records and internal accounting controls provisions.
In Hungary, Microsoft’s subsidiary won $13.7 million in business through “improper payments,” the SEC said.
From at least 2013 through 2015, the Hungary subsidiary paid government officials “through third party vendors, consultants, distributors and resellers, including in circumstances where there was no evidence of any services provided by the third parties.”
“Improper payments were also funded through excessive discounts that Microsoft’s senior executives in Hungary approved based on vague justifications without ensuring they were passed on to the end government customers,” the SEC said.
In Saudi Arabia from 2012 to 2014, employees in Microsoft’s local subsidiary “diverted at least $440,000 . . . intended to be used for marketing and developing business proposals with Microsoft’s partners, to a slush fund that was used to pay travel expenses for Saudi government employees and for gifts, furniture, laptops, tablets and other equipment for government agencies,” the SEC said.
The slush fund was maintained by two of Microsoft’s vendors who were given big discounts for Microsoft products. The vendors disbursed the slush fund “at the direction of MS Saudi Arabia employee.”
In Turkey in 2014, executives in Microsoft’s subsidiary “approved an excessive discount in a transaction involving an unauthorized third party in connection with a government tender in circumstances where there is no evidence of services provided by the third party.”
In Thailand from 2012 through 2015, Microsoft’s subsidiary gave “improper travel and gifts and other things of value to both foreign government officials and employees of non-government customers, respectively, through slush funds maintained by their third party vendors and resellers.”
Microsoft currently has about 144,000 employees worldwide.
Richard L. Cassin is editor at large of the FCPA Blog.
Difficult to understand why the amount of the MS agreed payment to the DoJ and SEC is so "reasonable" compared to the fines imposed on foreign companies for similar violations of the FCPA.
Sure that there must be a lot of good technical / legal reasons for it, but as seen from a foreign perspective, it may give the impression that the DoJ does not apply the same treatment to US vs foreign corporations and is much more severe when implementing the FCPA against non US companies.. Cf the top 10 of DoJ fines.
Have a nice day.
In response to the question about the lenient fines, I think the guidelines are very instructive about how to treat companies that proactively detect and respond to FCPA violations including weighing the ade4quacy of the remedial action they take. MS declared the violation, cooperated and took remedial actions…
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