6 ms·

I was prepared to get my pitchfork out, but after reading I'm struggling to connect the dots. This article is scant on details of what illegal or favorable beha

by madrox 5y ago

I was prepared to get my pitchfork out, but after reading I'm struggling to connect the dots. This article is scant on details of what illegal or favorable behavior Microsoft is expecting in exchange for money. The only concrete mention is a previous SEC filing that has nothing to do with this whistleblower. The first example about $40k doesn't seem to explain what Microsoft was actually thinking it would get for that money, let alone whether that money was illegal. At worst, it seemed to violate corporate policy, which I can understand if that got missed in an initial review. The other examples don't sound like bribery on Microsoft's part so much as resellers squeezing as much out of a deal as they can get away with. I call that a problem with the reseller model. I imagine Microsoft looks the other way while resellers make lots of money because, realistically, being in some of the markets mentioned is impossible unless you're connected with the right person. While not necessarily efficient, I wouldn't call that illegal or even unethical without a lot more detail than this article provides. But maybe I'm missing something. This article reads as poorly researched, and the whistleblower comes off as disgruntled more than ethical. Edit: It's worth noting that the whistleblower's original words are a little more well-written than this article [1]. However, it makes the contrast clearer between what is factual vs what is only insinuated. 1: https://www.lioness.co/post/microsoft-is-using-illegal-bribes-in-the-middle-east-and-africa-why-is-the-sec-turning-a-blind-eye https://www.lioness.co/post/microsoft-is-using-illegal-bribe...

jamal-kumar 5y ago
An Overview The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. ("FCPA"), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person. Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States. The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls.[1] I'm not a lawyer, but at worst it's starkly clear to me that this runs afoul of the law. Might I suggest it may be the awareness of it is the something you are missing? https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act https://www.justice.gov/criminal-fraud/foreign-corrupt-pract...
- madrox 5y ago
  You'll need to draw that line a little clearer, because it's not starkly clear to me. I'm aware of the definition of bribery. I don't think anything mentioned here describes graft as much as it describes the reseller business unless there is some law that limits the amount of money a reseller makes on a deal, or that a purchaser is required to use all of said purchase. In the Saudi example, the contractor got a great deal, but that's hardly illegal. In the Qatar example, buying more seats than you use is a common problem and any company that sells based on seats is guilty of this on some level. For me to take this farther than "that's how reselling works," there'd need to be some signs that Microsoft employees or government officials were seeing kickbacks from these inefficient deals...basically, the resellers were the ones doing the bribing. The whistleblower seems to be insinuating that's happening, and maybe it is, but there's no hard evidence of it here or that it's something systemic that Microsoft is promoting (indeed, Microsoft would be one of the victims in that case). Without more detail on what exactly Microsoft was extracting out of these circumstances I find the whole thing vague.
  - tialaramex 5y ago
    > Without more detail on what exactly Microsoft was extracting out of these circumstances I find the whole thing vague. I think the big problem here is that you've misunderstood why bribery is a criminal matter. The fact you're talking about Microsoft being "one of the victims in that case" is another sign you do not get it. Corruption itself is the problem, we're not trying to ensure Microsoft gets their $$$. To root out corruption, the relatively less corrupt major industrialised nations agreed rules forbidding their business entities from having anything to do with such practices even via a third party. When Microsoft realises that their guy in Saudi is involved in something dodgy, their duty isn't "hide it so the big bosses don't know" or even "pay the guy off and find somebody else" but to report this corruption to the government. These are leaches, they have to be starved, and that won't be effective so long as, like in this story, there are nods and winks and everybody pretends it's fine so long as they got paid.
    - madrox 5y ago
areoform 5y ago
It's not "resellers" making money, it's apparent that MS' employees and salespeople are using fake contracts and "discounts" to funnel money to decision makers. What MS got out of it at the end of the day — a contract or perhaps some personal earmark for a salesperson — doesn't matter. Their bribes distorted the market, entrenched corruption, and made the lives of people living in these countries worse. It should be punished to the fullest extent of the law. This section in particular is damning, > In another instance, he saw a contractor for the Saudi interior ministry receive a $13 million discount on its software — but the discount never made it back to the end customer. In another case, Qatar’s ministry of education was paying $9.5 million a year for Office and Windows licenses that were never installed. One way or another, money would end up leaking out of the contracting process, most likely split between the government, the subcontractor, and any Microsoft employees in on the deal. These "subcontractors" are usually relatives of people in Government, and they're bribing these officials, then splitting money between all of them in exchange for contracts. This is illegal under the Foreign Corrupt Practices Act. The whistleblower wrote a post detailing his accusations here, https://www.lioness.co/post/microsoft-is-using-illegal-bribes-in-the-middle-east-and-africa-why-is-the-sec-turning-a-blind-eye https://www.lioness.co/post/microsoft-is-using-illegal-bribe... These provide even more color. > In 2016, a request came through in the amount of $40,000 to accelerate closing a deal in one African country. [...] On top of that, the partner in the deal was underqualified for the project’s outlined scope, and he wasn’t even supposed to be doing business with Microsoft: he had been terminated four months earlier for poor performance on the sales team, and corporate policy prohibits former employees from working as partners for six months from their departure without special approval. > I brought these issues up with the Microsoft services architect who wrote the request, asking why she didn’t take the work in this case to our very capable in-house team, Microsoft Services. She said our in-house daily rate is very expensive, and she needed a less expensive team to handle the pilot. and then, > Meanwhile, the woman’s manager sought me out, angry that I had bypassed him; I told him I was only following company policy. Soon after, he was promoted and became my manager. He immediately scheduled a one-on-one meeting, in which he told me our job is to bring as much revenue as we can to Microsoft. He added, “I don’t want you to be a blocker. If any of the subsidiaries in the Middle East or Africa are doing something, you have to turn your head and leave it as is. If anything happens, they will pay the price, not you.” When I said I would not block anything unless it violated company policy, his tone took a sharp turn. He shouted that I was not capable of doing this business and couldn’t close deals. But my 18-year track record spoke for me. He escalates, but no one does anything, so he writes to the CEO. > The aforementioned vice president immediately got back in touch with me, to say that by escalating the matter to Nadella, I had just “booked a one-way ticket out of Microsoft.” > A general manager told me people panicked when I came to the subsidiary offices, and I had become “one of the most hated persons in Africa.” Only later did I realize this was because I asked too many questions; I was stopping people from skimming money off their deals. This is a classic culture of corruption. It doesn't get starker than this. > Examining an audit of several partners conducted by PricewaterhouseCoopers, I discovered that when agreeing to terms of sale for a product or contract, a Microsoft executive or salesperson would propose a side agreement with the partner and the decision maker at the entity making the purchase. This decision maker on the customer side would send an email to Microsoft requesting a discount, which would be granted, but the end customer would pay the full fee anyway. The amount of the discount would then be distributed among the parties in cahoots: the Microsoft employee(s) involved in the scheme, the partner, and the decision maker at the purchasing entity—often a government official. Walmart got caught recently doing something very similar, https://www.sec.gov/news/press-release/2019-102 https://www.sec.gov/news/press-release/2019-102 https://www.reuters.com/article/us-walmart-fcpa/walmart-to-pay-282-million-to-settle-seven-year-global-corruption-probe-idUSKCN1TL27J https://www.reuters.com/article/us-walmart-fcpa/walmart-to-p... You can see the timeline of FCPA cases here, https://www.sec.gov/enforce/sec-enforcement-actions-fcpa-cases https://www.sec.gov/enforce/sec-enforcement-actions-fcpa-cas...
bearbearbear 5y ago
It's not uncommon for corporations to pay money in bribes because in many countries it's a cost of doing business; it would be otherwise impossible to get anything done. If a company is required to pay, say, $3,000 to a corrupt official to pass a checkpoint and get access to an area where they have some business to tend to, then scale that economically to a multinational conglomerate like Microsoft who might do business in that same area 35 times in a week for various reasons and the amount of bribe money flowing out of their coffers increases to scale.

by madrox 5y ago

jamal-kumar 5y ago

An Overview The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. ("FCPA"), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person. Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States. The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls.[1] I'm not a lawyer, but at worst it's starkly clear to me that this runs afoul of the law. Might I suggest it may be the awareness of it is the something you are missing? https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act https://www.justice.gov/criminal-fraud/foreign-corrupt-pract...

madrox 5y ago
You'll need to draw that line a little clearer, because it's not starkly clear to me. I'm aware of the definition of bribery. I don't think anything mentioned here describes graft as much as it describes the reseller business unless there is some law that limits the amount of money a reseller makes on a deal, or that a purchaser is required to use all of said purchase. In the Saudi example, the contractor got a great deal, but that's hardly illegal. In the Qatar example, buying more seats than you use is a common problem and any company that sells based on seats is guilty of this on some level. For me to take this farther than "that's how reselling works," there'd need to be some signs that Microsoft employees or government officials were seeing kickbacks from these inefficient deals...basically, the resellers were the ones doing the bribing. The whistleblower seems to be insinuating that's happening, and maybe it is, but there's no hard evidence of it here or that it's something systemic that Microsoft is promoting (indeed, Microsoft would be one of the victims in that case). Without more detail on what exactly Microsoft was extracting out of these circumstances I find the whole thing vague.
- tialaramex 5y ago
  > Without more detail on what exactly Microsoft was extracting out of these circumstances I find the whole thing vague. I think the big problem here is that you've misunderstood why bribery is a criminal matter. The fact you're talking about Microsoft being "one of the victims in that case" is another sign you do not get it. Corruption itself is the problem, we're not trying to ensure Microsoft gets their $$$. To root out corruption, the relatively less corrupt major industrialised nations agreed rules forbidding their business entities from having anything to do with such practices even via a third party. When Microsoft realises that their guy in Saudi is involved in something dodgy, their duty isn't "hide it so the big bosses don't know" or even "pay the guy off and find somebody else" but to report this corruption to the government. These are leaches, they have to be starved, and that won't be effective so long as, like in this story, there are nods and winks and everybody pretends it's fine so long as they got paid.
  - madrox 5y ago

areoform 5y ago

It's not "resellers" making money, it's apparent that MS' employees and salespeople are using fake contracts and "discounts" to funnel money to decision makers. What MS got out of it at the end of the day — a contract or perhaps some personal earmark for a salesperson — doesn't matter. Their bribes distorted the market, entrenched corruption, and made the lives of people living in these countries worse. It should be punished to the fullest extent of the law. This section in particular is damning, > In another instance, he saw a contractor for the Saudi interior ministry receive a $13 million discount on its software — but the discount never made it back to the end customer. In another case, Qatar’s ministry of education was paying $9.5 million a year for Office and Windows licenses that were never installed. One way or another, money would end up leaking out of the contracting process, most likely split between the government, the subcontractor, and any Microsoft employees in on the deal. These "subcontractors" are usually relatives of people in Government, and they're bribing these officials, then splitting money between all of them in exchange for contracts. This is illegal under the Foreign Corrupt Practices Act. The whistleblower wrote a post detailing his accusations here, https://www.lioness.co/post/microsoft-is-using-illegal-bribes-in-the-middle-east-and-africa-why-is-the-sec-turning-a-blind-eye https://www.lioness.co/post/microsoft-is-using-illegal-bribe... These provide even more color. > In 2016, a request came through in the amount of $40,000 to accelerate closing a deal in one African country. [...] On top of that, the partner in the deal was underqualified for the project’s outlined scope, and he wasn’t even supposed to be doing business with Microsoft: he had been terminated four months earlier for poor performance on the sales team, and corporate policy prohibits former employees from working as partners for six months from their departure without special approval. > I brought these issues up with the Microsoft services architect who wrote the request, asking why she didn’t take the work in this case to our very capable in-house team, Microsoft Services. She said our in-house daily rate is very expensive, and she needed a less expensive team to handle the pilot. and then, > Meanwhile, the woman’s manager sought me out, angry that I had bypassed him; I told him I was only following company policy. Soon after, he was promoted and became my manager. He immediately scheduled a one-on-one meeting, in which he told me our job is to bring as much revenue as we can to Microsoft. He added, “I don’t want you to be a blocker. If any of the subsidiaries in the Middle East or Africa are doing something, you have to turn your head and leave it as is. If anything happens, they will pay the price, not you.” When I said I would not block anything unless it violated company policy, his tone took a sharp turn. He shouted that I was not capable of doing this business and couldn’t close deals. But my 18-year track record spoke for me. He escalates, but no one does anything, so he writes to the CEO. > The aforementioned vice president immediately got back in touch with me, to say that by escalating the matter to Nadella, I had just “booked a one-way ticket out of Microsoft.” > A general manager told me people panicked when I came to the subsidiary offices, and I had become “one of the most hated persons in Africa.” Only later did I realize this was because I asked too many questions; I was stopping people from skimming money off their deals. This is a classic culture of corruption. It doesn't get starker than this. > Examining an audit of several partners conducted by PricewaterhouseCoopers, I discovered that when agreeing to terms of sale for a product or contract, a Microsoft executive or salesperson would propose a side agreement with the partner and the decision maker at the entity making the purchase. This decision maker on the customer side would send an email to Microsoft requesting a discount, which would be granted, but the end customer would pay the full fee anyway. The amount of the discount would then be distributed among the parties in cahoots: the Microsoft employee(s) involved in the scheme, the partner, and the decision maker at the purchasing entity—often a government official. Walmart got caught recently doing something very similar, https://www.sec.gov/news/press-release/2019-102 https://www.sec.gov/news/press-release/2019-102 https://www.reuters.com/article/us-walmart-fcpa/walmart-to-pay-282-million-to-settle-seven-year-global-corruption-probe-idUSKCN1TL27J https://www.reuters.com/article/us-walmart-fcpa/walmart-to-p... You can see the timeline of FCPA cases here, https://www.sec.gov/enforce/sec-enforcement-actions-fcpa-cases https://www.sec.gov/enforce/sec-enforcement-actions-fcpa-cas...

bearbearbear 5y ago

It's not uncommon for corporations to pay money in bribes because in many countries it's a cost of doing business; it would be otherwise impossible to get anything done. If a company is required to pay, say, $3,000 to a corrupt official to pass a checkpoint and get access to an area where they have some business to tend to, then scale that economically to a multinational conglomerate like Microsoft who might do business in that same area 35 times in a week for various reasons and the amount of bribe money flowing out of their coffers increases to scale.