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Microsoft Business In Romania The Subject Of Romanian Prosecution

Microsoft has been under Foreign Corrupt Practices Act scrutiny since spring 2013.  (See here [1] and here [2] for prior posts).  The conduct at issue concerns the company’s relationships with resellers and consultants in China, Romania, Italy, Pakistan and Russia.

Regarding the Romania prong of Microsoft’s scrutiny, last week Romania’s National Anti-Corruption Directorate announced [3] the start of a prosecution against nine former ministers related to an investigation of Microsoft IT licenses for schools. According to the announcement and this [4] article, it appears that the prosecution concerns a “47% discount granted by Microsoft to the government, which allowed the payment of commissions” to the former ministers.

According to this [5] article and quoting the former director of Romania’s Foreign Intelligence Service, the origins of the Romanian prosecution is an investigation conducted by the FBI.

Discounts to distributors have served as a basis for FCPA enforcement actions in the past (see here [6], here [7], and here [8] for examples among others).

Microsoft’s FCPA scrutiny has been highlighted on these pages before because it debunks the fallacy of “good companies don’t bribe period.” (See here [9] for the prior post).

“Good companies don’t bribe – period” was the title of a Minneapolis StarTribune business column [10] which assailed those who have criticized various aspects of the FCPA or FCPA enforcement.  In support of the position that “good companies don’t bribe – period,” the article stated:

“The [FCPA] has established America’s reputation as a strong proponent of ethical business practices abroad.  As Microsoft recognizes in its anti-corruption policy: ‘corruption promotes poverty, hunger, disease and crime, and keeps societies and individuals from reaching their full potential. Corruption is one of the leading obstacles to economic and social development. Microsoft is committed to observing the standards of conduct set forth in the [FCPA] and the anti-corruption and anti-money-laundering laws of the countries in which it operates.’”

The absolutist position that “good companies don’t bribe – period” was undermined a few months after the article was written and after Microsoft was put on a pedestal by the authors when it was reported [11] that the DOJ and SEC both open FCPA inquiries concerning various aspects of Microsoft’s business.  A Microsoft executive acknowledged the investigation at the time and stated [12]:

“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. We also invest heavily in proactive training, monitoring and audits to ensure our business operations around the world meet the highest legal and ethical standards.  […] We are a global company with operations in 112 countries, nearly 98,000 employees and 640,000 business partners. […]  We have more than 50 people whose primary role is investigating potential breaches of company policy, and an additional 120 people whose primary role is compliance. In addition, we sometimes retain outside law firms to conduct or assist with investigations. This is a reflection of the size and complexity of our business and the seriousness with which we take meeting our obligations. We also invest in proactive measures including annual training programs for every employee, regular internal audits and multiple levels of approval for contracting and expenditure. In a company of our size, allegations of this nature will be made from time to time. It is also possible there will sometimes be individual employees or business partners who violate our policies and break the law. In a community of 98,000 people and 640,000 partners, it isn’t possible to say there will never be wrongdoing.”

How is it that Microsoft, a company championed as a leader in ethical and compliant business conduct, became the subject of FCPA scrutiny?  For the same reasons that many ethically sound business organizations have resolved FCPA enforcement actions and for the same reasons that over one-hundred companies are currently the subject of active FCPA scrutiny.  These reasons are broad concepts of corporate criminal liability and the inherent realities of doing business in the global marketplace.