Bribes connected to government procurements drew the attention of US authorities; agreement was realized outside of court. Both the Hungarian subsidiary and the parent company are obliged to pay.
As the Hungarian news portal hvg.hu describes, more than 8.7 million dollars (2.5 billion HUF) will be paid by Microsoft’s Hungarian subsidiary as part of an amicable agreement as a result of the state software procurement case initiated by the United States – described by Washington Department of Justice. According to US Foreign Corrupt Practices Act, the ministry launched the investigation because certain suspicions arised that the subsidiary’s management sold company softwares at extremely low prices to government institutions.
The investigation – in which the FBI and the US stock market supervision was also involved – found that between the period of 2013-2015, “a senior leader of the company”, along with several employees – with the involvement of intermediaries – sold softwares for the government sector, and posted the transaction at discounted prices; however, state organs actually got the licence of the programs at a higher price, while the difference was “used for corrupt purposes.”
As to say – Microsoft persuaded the State to use their software by bribes, for which the state actually paid a much higher price than on paper; therefore, bribes flowed back through intermediaries.
The case was revealed by Wall Street Journal which had written earlier – this was not the first time when similar investigation took place.
In 2013, similar issues were identified by the federal authorities at Microsoft’s Romanian, Italian and Chinese representatives. According to the WSJ, there were such cases in Russia and Pakistan as well.
When determining the amount of the amicable agreement with Microsoft Hungary Ltd., US authorities took into account that – despite the subsidiary did not reveal the irregularity by itself – but cooperated during the investigation process. Furthermore, it was also evaluated that the company terminated the contract with four intermediary companies, and after an internal investigation introduced a stricter control system. Accordingly, the penalty was reduced by 25% compared to the lowest fines.
However, this is not the complete fine: Microsoft’s parent company, however, will pay 16.5 million USD (4.8 billion HUF) to the Exchange Commission (SEC) due to the Hungarian case. This is the amount of 13.78 million dollars – including interests which is determined as the business value that the corruption transactions brought to the company.
The case is not closed completely: according to the notice, FBI’s New York office still continues the investigation.
During Microsoft Hungary’s internal investigation, not only all the government contracts and associated documents – even deleted e-mails – were examined, but four of the company’s employees got fired as well.
István Papp was also among them, who was the Managing Director at Microsoft Hungary during the time of the suspicious transactions (2013-2014). Shortly before, in 2015, István Papp was promoted – instead of the local representative position, he became vice president of sales, marketing and business service at Microsoft Asia-Pacific region.
It is interesting that after he was removed from the position as a result of the internal investigation, and got fired from the whole Microsoft company, he set up in state administration – in a previously non-existent position of the National Investment Agency (HIPA). Meanwhile another removed former leader, Viktor Sagyibó received a position at prime ministership.