Microsoft is entangled in a U.S. government investigation into whether the software maker and some of its business partners resorted to bribery to close deals in China, Romania and Italy, according to a report published Tuesday.
Citing anonymous people familiar with the matter, The Wall Street Journal said the Justice Department and the Securities and Exchange Commission are examining whether kickbacks were paid to foreign officials to help close sale of software. The probe’s targets include resellers of Microsoft software, company consultants and Microsoft’s own employees outside the U.S., according to the Journal.
The newspaper emphasized that the inquiry remains in an early stage and there have been no accusations of wrongdoing.
In a blog post, Microsoft lawyer John Frank said the issues raised in the Journal’s story are important enough to merit a review by the Redmond, Wash., company and the federal government.
“We take all allegations brought to our attention seriously, and we cooperate fully in any government inquiries,” wrote Frank, Microsoft’s deputy general counsel. “Like other large companies with operations around the world, we sometimes receive allegations about potential misconduct by employees or business partners, and we investigate them fully, regardless of the source.”
Both the Justice Department and the SEC declined to comment.
The reported investigation poses another potential legal headache for Microsoft, which has been sparring with government regulators in the U.S. and Europe for the past two decades.
Most of the regulatory battles have been over whether Microsoft abused its position as the leading maker of personal computer software to thwart competition. Microsoft suffered it latest setback in that regulatory arena earlier this month when European regulators fined the company 561 million euros ($733 million). Microsoft violated an agreement to provide users of PCs running on its Windows operating system with an alternative to its Internet Explorer Web browser.
The probe is in a preliminary phase, and the government hasn’t accused Redmond, Washington-based Microsoft or any of its business associates of wrongdoing, the newspaper reported, citing people familiar with the inquiry.
Microsoft said it employs more than 50 people to investigate potential breaches of company policy, as well as 120 more people to make sure the software maker complies with local laws and regulations.
“The matters raised in the Wall Street Journal are important, and it is appropriate that both Microsoft and the government review them,” Frank wrote in the blog. “It is also important to remember that it is not unusual for such reviews to find that an allegation was without merit.”
The allegations in China were already investigated by Microsoft, which conducted a 10-month internal probe, the Wall Street Journal reported. An outside law firm hired to conduct the probe, which ended in 2010, found no evidence of wrongdoing, the newspaper said.
The investigation cited by the Journal revolves around the Foreign Corrupt Practices Act, a 36-year-old law that forbids U.S. companies from bribing foreign officials to close deals.
An anonymous tipster who helped Microsoft make sales in China passed along the allegations of sales misconduct to U.S. government regulators last year, according to the Journal. The tipster alleged an executive working at Microsoft’s China subsidiary authorized paying bribes to close sales, the Journal reported.
U.S. regulators are also examining whether bribes were paid in exchange for software contacts in Romania and Italy, the newspaper said.
The Romanian Ministry of Communications checked its records, which show that it “didn’t conclude the contract in 2008 to which the Wall Street Journal made reference,” it said in an e-mailed statement today. “The ministry concluded a contract in 2009 with a group of companies, but it’s important to mention that the sums don’t match the ones mentioned by the WSJ.”
(The Associated Press and Bloomberg News contributed to this report)
