Technology

Microsoft is tied to hundreds of millions of dollars in foreign bribes, a whistleblower claims

In 2016, Yasser Elabd noticed a $40,000 payment to a customer in Africa that didn’t smell right. The payment came from Microsoft’s Business Investment Fund – money earmarked for closing deals and developing new lines of business. But the customer named in the inquiry was not a customer at all, at least not according to the internal customer list. He was a former Microsoft employee who had been fired for poor performance and had left the company so recently that its regulations would have barred him from admission.

It was suspicious, more like a bribe than a proper business solicitation — but when he pressed for more details, other executives began pushing back. Eventually the payment stopped, but there were no further consequences and few seemed interested in digging deeper. He concluded that his colleagues were far happier with this type of payment than he was.

For the next two years, Elabd says he did everything in his power to root out these silent bribes – a struggle that made him an outcast among his peers and eventually cost him his job. In retrospect, however, he believes that Microsoft had no interest in stopping the payouts, preferring instead to let bogus contracts go through and accept the money that came with them.

Elabd went public with his experiences in an essay published on Friday by the whistleblower platform Lioness, alleging widespread bribery through Microsoft’s overseas contract business. Elabd estimates that more than $200 million is spent on company-related bribes and kickbacks each year, often in countries such as Ghana, Nigeria, Zimbabwe, Qatar and Saudi Arabia. He believes that in the regions he has worked in, more than half of the sales reps and managers participated. If true, it’s a stunning look at the ongoing corruption surrounding international tech contracting — and Microsoft’s ongoing efforts to curb it.

As director of emerging markets for the Middle East and Africa, Elabd saw many different versions of the problem. Sometimes, as in the African case, they were suspicious requests from the corporate investment fund. In another case, he saw a Saudi Interior Ministry contractor receive a $13 million rebate on his software — but the rebate never returned to the end customer. In another case, the Qatar Ministry of Education paid $9.5 million a year for Office and Windows licenses that were never installed. One way or another, money would end up flowing out of the contracting process, most likely split between the government, the subcontractor, and any Microsoft employees involved in the deal.

This type of corporate bribery is a common problem internationally, particularly in countries where the government is the main customer and middle-level bureaucrats view bribes as part of the cost of doing business. World Economic Forum estimates that more than $1 trillion is lost to bribery around the world every year. It is more difficult to estimate the proportion of fraud Elabd describes, in which international companies pay local decision-makers to secure their business or set up bogus deals just to plunder the treasury. The costs are usually borne by the country’s taxpayers – often in countries with little money – and diverted to the bureaucrats and subcontractors, rather than the people it’s designed to help. But no small part of the money is sent to the parent companies as part of the ruse, giving them an unfortunate incentive to turn a blind eye.

It’s a challenge for any multinational — but Elabd’s experience at Microsoft led him to believe the company had given up fighting it. “It works on all levels,” he said in an interview with The edge. “All leaders are aware of this, and they nurture the bad people. If you do the right thing, they won’t promote you.”

When asked for comment, Microsoft emphasized its commitment to ethical practices, citing the “Standards of Business” training that all employees are required to complete, including specific training on reporting bribery incidents like that described by Elabd.

“We are committed to conducting our business in a responsible manner, and we always encourage everyone to report anything they see that might violate the law, our policies, or our ethical standards,” said Becky Lenaburg, Microsoft VP and Deputy Head of Legal for Compliance and Compliance Ethics. “We believe we have already investigated and addressed these many year old allegations. We have worked with government agencies to address any concerns.”

Microsoft has struggled with foreign bribery in the past. According to a Justice Ministry investigation, a senior executive in Hungary was found to have inflated margins as part of a bribery scheme between 2013 and 2015. A separate SEC case alleged that more than $440,000 in marketing money was diverted for gifts to Saudi government employees. Microsoft settled both cases in 2019, paying a total of $25 million to law enforcement agencies.

In an open letter to employees after the deal, Microsoft President Brad Smith called the behavior “completely unacceptable” and stressed the need for robust internal oversight. “As a company, we must continue to work to improve the systems that help us prevent bad behavior,” Smith wrote. “We hope and expect that if you see something that doesn’t seem consistent with our policies or our values, you’ll let us know so small issues don’t become bigger.”

But Elabd’s essay tells a different story. He says he has escalated the issue and successfully stopped the initial Nigeria request – but the broader issues have not been addressed. Soon, a manager associated with the request called him over for a heated chat.

“I don’t want you to be a blocker,” he recalled the manager’s words. If he spotted anything suspicious, the manager would say, “You have to turn your head and leave it as is.”

In the months that followed, Elabd was barred from doing business. Once approved travel requests were suddenly blocked. When he turned down a performance improvement plan, he lost the job and left Microsoft for good in August 2018.

In the years since, he has followed reports of bribes from Qatar, Cameroon and South Africa, all involving Microsoft and its subcontractors. He even took the reports to the Securities and Exchange Commission in hopes they would take action – but he says he’s seen little action from the agency. (The SEC has not responded to a request for comment as of press time.)

This type of bribery is illegal under the Foreign Corrupt Practices Act – but prosecutions are usually based on more than a single incident. Leah Moushey, a senior associate at Miller & Chevalier who focuses on FCPA cases, says law enforcement often focuses on a company’s internal efforts to stop corruption. “They will assess whether the compliance program is well designed in good faith and whether there is evidence that it is working,” says Moushey.

But while a good trial can excuse a few bad cases, evidence of a bad trial can result in harsher punishment, a particularly serious threat given that faced by the Justice Department new focus on repeat offenders in companies. “Companies can’t bury their heads in the sand when a problem arises,” says Moushey. “You can be held accountable if you deliberately ignore red flags that are popping up in your organization.”

It’s hard to say where Microsoft falls on that spectrum. The company has blocked payments and fired employees in many of the cases cited by Elabd, and when it hasn’t, it’s often because investigations failed to produce evidence of wrongdoing. But for Elabd, the risk of losing a sales job isn’t enough to combat the broader culture of corruption.

“They have never taken legal action against these employees, even though they know they are stealing company and government money,” he says. “The hidden message to employees is, ‘Do what you want, make as much money as you can, and the worst that can happen is you get fired.'”

https://www.theverge.com/2022/3/25/22995144/microsoft-foreign-corrupt-practices-bribery-whistleblower-contracting Microsoft is tied to hundreds of millions of dollars in foreign bribes, a whistleblower claims

Fry Electronics Team

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