Microsoft Hit With US Bribery Probe Over Deals in Hungary (wsj.com)

Microsoft is being investigated by U.S. authorities over potential bribery and corruption related to software sales in Hungary, WSJ reported Thursday. From a report: The investigation follows a series of similar probes into Microsoft business partners that surfaced in 2013 in five other countries. Microsoft made a push earlier this decade to expand in emerging markets, as well as smaller, middle-income countries like Hungary. In some cases, those bets have turned into legal and reputational challenges. The U.S. Justice Department and the Securities and Exchange Commission are probing how Microsoft sold software such as Word and Excel to middleman firms in Hungary that then sold those products to government agencies there in 2013 and 2014, according to these people. Microsoft sold some of its products to these intermediaries at steep discounts, and then these firms sold the products to the Hungarian government at closer to full price, these people said.

Comments

'This is Not Your Father's Microsoft'

[Gravis Zero]

Hmm... sure seems like they haven't changed.

Re:these people just discovered wholesale

[szabo.m.peter]

The government is a big enough buyer to by from MS directly, there is no need for middle-men.

This was about corruption, rather than usual business business. It seems the corruption scheme was organized by high ranking government officials (who probably purchased much more licences than needed), and the middle-men where paying kickbacks to these officials.

It seems MS Hungary leadership also knew about the sales being a fraud, as the (at the time) CEO of MS Hungary was quickly fired by the mother company. After leaving MS Hungary, he got a high ranking job in the Ministry that organized the license purchases...

Why action for bribes in other countries?

[SuperKendall]

The fact of the matter is, there are some places on earth where any business of any size is not going to be done without bribes.

Why punish Microsoft for doing what every other company does in Hungary?

Re:Why action for bribes in other countries?

[Nutria]

The Foreign Corrupt Practices Act of 1977.

I've never been able to understand why it's our business to prosecute someone else's criminals. Let Hungary prosecute them!!

Re:Why action for bribes in other countries?

[PPH]

The key word here is Foreign. Slipping a few bucks to domestic politicians is protected speech. This wasn't passed to prosecute criminal activities overseas. It was passed to keep all the political contribution money here at home.

Re:Why action for bribes in other countries?

[rtb61]

'ER' for the same reason you prosecute people for rape and murder even though other people rape and murder. The idea is to prosecute everyone who commits that crime, rehabilitate them if possible, if not lock them up for the rest for the rest of their lives. For corporations, you must eventually fold them up, if they continue to repeat the same corrupt practices. In the case of M$ take it's source code for all of it's products and make them public domain free to access by all other corporations.

Re:Why action for bribes in other countries?

[GrimSavant]

The Foreign Corrupt Practices Act of 1977.

I've never been able to understand why it's our business to prosecute someone else's criminals. Let Hungary prosecute them!!

Because the criminals are often the ones running their government, particularly with these sorts of crimes.

Uh, because intervention works so well?

[SuperKendall]

Uh, because rule of law is a good thing even internationally?

Well I guess 'Merica should just go in and NUKE THOSE GODLESS HUNGARIANS.

Rule of law is great but you can't enforce it everywhere, so why try for places that do not even want or accept a strong rule of law? All you will do by making American companies non-competitive there is even further weaken the rule of law abroad. Let large companies get a foothold in and they will slowly improve things.

How to deal with corrupted countries

[manu0601]

It is nice to see US also goes after US companies for foreign corruption cases.

However, to defend Microsoft (I never thought I would do that one day), how were they supposed to deal with countries where you have to bribe in order to do business?

Re:How to deal with corrupted countries

[theCoder]

How to deal with it? Simple - don't. I know it's hard for the business world where bribery, er "treating the customer well" with lavish gifts, dinners, drinks, vacations, etc, is somehow considered normal, but that should stop. Yes, it's nice to be on the receiving end of that, but it raises the costs for everyone.

For a company like Microsoft, which is a virtual monopoly, it's completely unnecessary. What is the Hungry government going to do, not buy Word and Excel licenses? I could understand the question if this were some small company trying to break into the market, but Microsoft?

Worst case, you don't go into that market. If bribes are required, don't go. Bribing your way in will just increase the cost of your product for everyone. And if your product is really that good, then the country that "requires" bribes will miss out and either change its ways or do without. If it really bugs you, document as best as possible the bribery of your competitors. If they are US based (or owned by a US company), turn them in for violations of FCPA. Or just explain the bribery to any shareholder/investor/reporter that asks about it. No one (at least in the US) is going to really say that the company should have resorted to bribery.

So no, there are no places where you "have" to bribe. There are alternatives -- they are just harder (and don't enrich your friends or relatives with company cash).

Microsoft bribery/stock referrals

[najajomo]

Oct 1991: "Use MS stock as an incentive for recommendation/referral program. Each referral purchase is rewarded with share/fraction of share. Use direct mail to get the message out."