Microsoft agrees to $25M settlement following foreign bribery investigation in Hungary

Microsoft President Brad Smith. (GeekWire File Photo)

Microsoft will pay more than $25 million to settle a bribery probe by the U.S. Department of Justice and Securities and Exchange Commission into foreign corruption allegations. DOJ and SEC were investigating whether Microsoft violated a U.S. law barring overseas corruption. The agencies announced the settlement Monday.

The investigation centered on software sales in Hungary between 2012-2015. According to the Justice Department, Microsoft Hungary employees told the company they needed to discount products to sell them to government officials. In reality, the discounts were not passed onto customers and the savings were used for “corrupt purposes” according to DOJ, which called it a “bid rigging and bribery scheme” in the settlement documents.

“Today’s settlements involved employee misconduct that was completely unacceptable,” Microsoft President Brad Smith said in an email to employees that was also published on the company’s blog.

Federal authorities have looked into other Microsoft business relationships in places like China, Russia, Pakistan, Italy, and Romania during the same time period but the settlement announced Monday is only focused on Hungary, “where the most concerning conduct took place,” according to Smith. The Wall Street Journal first reported on the investigation in 2018.

The $26 million will be split across DOJ and SEC. Microsoft Hungary, a subsidiary of the Redmond, Wash., software company, entered a nonprosecution agreement with the Justice Department as part of the settlement.

DOJ said that Microsoft “received credit” for cooperating with the investigation even though the company did not admit wrongdoing.

Microsoft fired four employees in Hungary three years ago and ended relationships with four resellers tied to the scheme. Smith said that those responsible are “individuals and businesses that, in our view, behaved in a wholly unethical manner.”

Microsoft implemented a new system of controls to catch bad actors following the Hungary case. The company added a transparency program to ensure discounts are passed on to customers, strengthened its anti-corruption program, and added machine learning oversight that flags transactions that could be out of compliance.

“Ultimately, the world will successfully root corruption out of the global economy only if individuals, businesses, and governments everywhere stand up and deliver the message together that they will not stand for conduct that facilitates corruption,” Smith said in the email.

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