As reported on TechCrunch.
by GREGORY FERENSTEIN
Federal regulators are investigating Microsoft for allegedly bribing foreign governments for favor in software contracts. “Lawyers from the Justice Department and the Securities and Exchange Commission are examining kickback allegations made by a former Microsoft representative in China, as well as the company’s relationship with certain resellers and consultants in Romania and Italy,” sources familiar with the allegations, tell The Wall Street Journal, which broke the story earlier today.
An anonymous tipster alleges that Microsoft’s China division instructed him to offer kickbacks in exchange for signing off on software contracts. To further complicate the allegations, the tipster was also involved in a labor dispute with the software giant. The tipsters contact with Microsoft ended in 2008.
“Like every large company with operations around the world we sometimes receive allegations about potential misconduct by employees or business partners,” John Frank, Microsoft’s vice president and deputy general counsel, tells The Journal. “We cooperate fully in any government inquiries,” Frank added.
The probe is also investigating bribery practices in Italy, related to consultants of Microsoft’s customer loyalty program. Consultants were used as “vehicles for used such consultants as vehicles for lavishing gifts and trips on Italian procurement officials in exchange for government business.”
Federal investigators are conducting the probe under the Foreign Corrupt Practices Act and a new whistleblower program at the Securities and Exchange Commission. “Filing allegations simultaneously with the company and the government provides whistleblowers some job security. Companies can face private lawsuits for sacking employees in retaliation for submitting allegations to the SEC, even if the tips never lead to an enforcement action,” explains the Journal.
While Microsoft says it is diligent about investigating corruption, it has offices in over 100 countries and roughly 640,000 partners businesses around the globe.
Interestingly enough, ZDnet argues the claims against Microsoft should be taken with a healthy dose of skepticism, since The Journal itself was recently investigated for bribery, but never pursued by the U.S. government. “It comes only a few days after the Journal itself was investigated by U.S. federal authorities over what appear to be claims of bribery, but were not pursued by the U.S. government. Instead, the Journal, owned by the Rupert Murdoch’s News Corporation empire, blamed China for retaliating against the newspaper’s critical reporting of Beijing in recent weeks,” writes Zack Whittaker.
More on this story as it develops.