Microsoft on Monday agreed to pay more than $25 million to settle a case alleging the software giant violated a federal anti-bribery law, according to the Department of Justice (DOJ).
The company will pay the fees, including an $8.75 million criminal fine imposed on its Microsoft Hungary unit and over $16 million to the Securities and Exchange Commission (SEC), to settle the charges.
Microsoft Hungary, a wholly-owned subsidiary of Microsoft, admitted that it participated in a scheme between 2013 and 2015 to inflate margins on software sales and ultimately use the savings for “corrupt purposes,” according to the DOJ.
“According to Microsoft Hungary’s admissions, beginning by at least 2013 and continuing until at least 2015, a senior executive and other employees of Microsoft Hungary participated in a scheme to inflate margins in the Microsoft sales channel in connection with the sale of Microsoft software licenses to Hungarian government agencies,” the DOJ statement reads.
“In furtherance of that scheme, Microsoft Hungary executives and employees falsely represented to Microsoft that steep discounts were necessary to conclude deals with resellers who bid for the opportunity to sell Microsoft licenses to government customers,” it adds. “In actuality, the savings were not passed on to the government customers, but instead were used for corrupt purposes and were falsely recorded as ‘discounts.’ “
The savings were stored on Microsoft servers in the U.S., violating the Foreign Corrupt Practices Act, a 1977 law that prohibits U.S. companies from paying bribes to foreign officials to sweeten business deals.
Microsoft entered into a nonprosecution agreement with the DOJ over the case, and agreed to a cease-and-desist order with the SEC on related charges.
Microsoft President Brad Smith in an email to employees said the company “does not tolerate employees and partners who willfully break policies that go to fundamental issues of business integrity.”
Smith noted that all of the employees involved are “no longer with the company” and Microsoft terminated relationships with four resellers as a result of their investigation into the Hungary conduct.
Federal regulators have also investigated Microsoft’s dealings in Italy, China and Romania for potential violations of foreign corruption laws.
“We recognize that no business process can offer a perfect guarantee of eliminating all global instances of a human frailty that is as old as humanity itself,” Smith wrote. “That’s why we need strong laws and effective enforcement by agencies such as the DOJ and the SEC in the United States and around the world.”