U.S. probes whether partners of Microsoft bribed foreign officials


Microsoft spoke out on a report that it’s being investigated by the U.S. government. (ZOLTAN MATHE/EPA)

Federal officials are investigating allegations that business partners of Microsoft, one of the world’s richest companies, bribed foreign officials to help enhance sales of the company’s software, according to people familiar with the probe.

The allegations concern possible violations of the Foreign Corrupt Practices Act, which governs the behavior of companies that are based in the United States or whose shares are traded on U.S. exchanges.

The probe has focused on possible misbehavior in China, Italy and Romania, said the people familiar with the investigation, who spoke on the condition of anonymity because it is ongoing. Federal officials have made no determination that Microsoft or any of its business partners have violated the law.

The Justice Department and the Securities and Exchange Commission, both of which are involved in the probe, declined to comment.

Microsoft declined to confirm the existence of the investigation. But shortly after the Wall Street Journal reported on its Web site that a probe was underway, the company published a blog post from its deputy general counsel, John Frank, saying: “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 company noted that it has operations in 112 countries and has nearly 98,000 employees and 640,000 business partners.

The allegations from China emanate from a tipster, a former Microsoft contractor who had previously reported spending lavishly to persuade government officials to buy software. Microsoft used an outside law firm to conduct an investigation of those allegations in 2010 and found no wrongdoing.

A variation on those allegations, involving claims of bribes, was brought to federal investigators last year, said people familiar with the probe, which is in a preliminary phase. Some investigations of bribery in other countries are quietly closed, with no fines, charges or public confirmation of the inquiries.

Little is known about elements of the investigation involving Romania and Italy, but they appear to involve companies that resell or distribute Microsoft products to customers in those countries.

The passage of the Dodd-Frank financial legislation in 2010 created a new whistleblower program at the SEC that includes financial incentives for allegations that lead to successful investigations. The program received more than 3,000 tips last year, including 27 from China, the agency recently told Congress.

When tips of foreign bribery are credible, the resulting investigations often involve lawyers from the Justice Department. If a tip leads to more than $1 million in sanctions, whistleblowers can be awarded up to 30 percent of the proceeds. The first and only reward has gone to a tipster who received $50,000 for helping the SEC stop a multimillion-dollar fraud.

Dina ElBoghdady and Peter Finn contributed to this report.

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Craig Timberg is a national technology reporter for The Post.
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