Multiple media outlets on Wednesday were reporting that the US Justice Department and the Securities and Exchange Commission (SEC) were both investigating allegations that Microsoft representatives and reseller partners bribed foreign government officials in an effort to drum up software sales in China, Italy and Romania.
While greasing palms in other countries is often seen as just another cost of doing business, companies that do business in the US are bound by the 35-year-old federal Foreign Corrupt Practices Act (FCPA) to keep everything clean and above board worldwide, even when it means a bit of a competitive disadvantage.
Microsoft could face large fines - in the hundreds of millions of dollars - if investigators found they broke the rules. Four years ago, Siemens AG agreed to pay the DOJ and the SEC $800m in fines over similar accusations. Walmart has spent nearly $100m in the past year and has marshalled a team of more than 300 outside lawyers and accountants to try to head off SEC and DOJ punishment for violating the FCPA in Mexico, China, India and Brazil.
There are roughly 100 active federal FCPA investigations, insiders say. In the past two years, the DOJ has focused its attention on the foreign practices of several major corporations including Tyco International, Tyson Foods, Comverse Technology and Deutsche Telekom.
According to the New York Times, Microsoft's troubles began when a partner who had worked with Microsoft in China blew the whistle on the Redmond, Wash., software maker's efforts local government officials in Asia in order to win business deals. Microsoft conducted its own internal investigation into the allegations in 2010, but found no evidence of improper behavior, according to sources.
In a blog post responding to the allegations, John Frank, vice president and deputy general counsel at Microsoft said he could not comment specifically about any ongoing inquiries but that the company takes "all allegations brought to our attention seriously, and we cooperate fully in any government inquiries".
"Like other large companies with operations around the world, we sometimes receive allegations about potential misconduct by employees or business partners, and we investigate them fully, regardless of the source," Frank said. "It is also important to remember that it is not unusual for such reviews to find that an allegation was without merit.
"In a company of our size, allegations of this nature will be made from time to time. It is also possible there will sometimes be individual employees or business partners who violate our policies and break the law. In a community of 98,000 people and 640,000 partners, it isn't possible to say there will never be wrongdoing," he added.
Chris Gonsalves is editorial vice president of Channelnomics.
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