Microsoft (MSFT) may soon find itself in some significant legal trouble now that federal officials are investigating whether the company allegedly worked with firms that bribed foreign government officials into accepting Microsoft software contracts. Unnamed sources have told The Wall Street Journal that “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.” The Journal’s sources say that the investigation is still in a “preliminary” phase and that the government has yet to accuse the company or its overseas partners of any wrongdoing. The Journal also writes that the investigation is “one of dozens being conducted under the Foreign Corrupt Practices Act, a 1977 law that prohibits U.S. companies and companies that trade on U.S. stock exchanges from paying bribes to foreign officials.”
UPDATE: Microsoft deputy general counsel John Frank has posted the following statement on Microsoft’s official blog:
Today, the Wall Street Journal reported that the U.S. government is reviewing allegations that Microsoft business partners in three countries may have engaged in illegal activity, and if they did, whether Microsoft played any role in these alleged incidents.
We take 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. We also invest heavily in proactive training, compliance systems, monitoring and audits to ensure our business operations around the world meet the highest legal and ethical standards.
The matters raised in the Wall Street Journal are important, and it is appropriate that both Microsoft and the government review them. It is also important to remember that it is not unusual for such reviews to find that an allegation was without merit. (The WSJ reported earlier this week that an allegation has been made against the WSJ itself, and that, after a thorough investigation, its lawyers have been unable to determine that there was any wrongdoing).
We cannot comment about on-going inquiries, but we would like to share some perspective on our approach to compliance.
We are a global company with operations in 112 countries, nearly 98,000 employees and 640,000 business partners. We’re proud of the role we play in bringing technology to businesses, governments, non-profits and consumers around the world and the economic impact we have in local communities.
As our company has grown and expanded around the world, one of the things that has been constant has been our commitment to the highest legal and ethical standards wherever we do business.
Compliance is the job of every employee at the company, but we also have a group of professionals focused directly on ensuring compliance. We have more than 50 people whose primary role is investigating potential breaches of company policy, and an additional 120 people whose primary role is compliance. In addition, we sometimes retain outside law firms to conduct or assist with investigations. This is a reflection of the size and complexity of our business and the seriousness with which we take meeting our obligations.
We also invest in proactive measures including annual training programs for every employee, regular internal audits and multiple levels of approval for contracting and expenditure.
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. Our responsibility is to take steps to train our employees, and to build systems to prevent and detect violations, and when we receive allegations, to investigate them fully and take appropriate action. We take that responsibility seriously.