Bribery in Hungary to Cost Microsoft $26 Million

MANHATTAN (CN) – A Microsoft subsidiary agreed Monday to pay more than $26 million to resolve claims that its employees bribed Hungarian government officials to tie up software-licensing deals.

The Microsoft logo in Issy-les-Moulineaux, outside Paris, France, on April 12, 2016. (AP Photo/Michel Euler, File)

U.S. Attorney Geoffrey Berman announced the criminal penalty this morning, saying a Budapest-based Microsoft office had admitted to the scheme committed between 2013 and 2014.

As noted in a nonprosecution agreement, one senior executive of Microsoft and several other employees falsely represented to Microsoft that the company needed to steeply discount its licenses to conclude deals with resellers that bid for the opportunity to sell Microsoft licenses to government customers.

The deals resulted in profits to Microsoft of more than $14.5 million.

According to the Department of Justice, however, none of the purported discount savings were passed on to the government customers because the resellers used them, in part, to bribe Hungarian government officials.

FBI Assistant Director William Sweeney Jr. said the $8.7 million penalty imposed against Microsoft sends a message about how seriously the United States takes violations of the oversight of the Foreign Corrupt Practices Act, whether on behalf of an individual or entity.

Although Microsoft Hungary did not voluntarily disclose the misconduct, its cooperation with U.S. investigators netted the company a 25% reduction from U.S. Sentencing Guidelines.

As part of their of remediation, Microsoft Hungary terminated four licensing partners, and Microsoft Corp. has implemented an enhanced system of compliance and internal controls, company-wide, to address and mitigate corruption risks.

Microsoft Corp. also agreed to pay $16.5 million to the Securities and Exchange Commission, consisting of disgorgement and prejudgment interest from a parallel investigation of overlapping conduct.

Microsoft President Brad Smith addressed the resolution in a corporate blog post Monday, saying he was disappointed and embarrassed by the conduct of the Microsoft Hungary employees.

 “Today’s announcement is a testament in part to the big problems that can be created by a few people,” Smith wrote. “It took misdeeds by only a few people between 2012 and 2015 to lead to today’s $26 million settlement with two government agencies. That entire amount relates to conduct in Hungary, just one of the more than 120 countries in which we do business.”

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