Hungary Subsidiary Of Microsoft Corporation Agrees To Pay $8.7 Million Criminal Fine To Resolve Foreign Bribery Case

Press Release Hungary Subsidiary Of Microsoft Corporation Agrees To Pay $8.7 Million Criminal Fine To Resolve Foreign Bribery Case Monday, July 22, 2019 Share FacebookLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. XLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. LinkedInLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. Email For Immediate Release U.S. Attorney's Office, Southern District of New York Geoffrey S. Berman, United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that Microsoft Magyarország Számítástechnikai Szolgáltató és Kereskedelmi Kft. (Microsoft Hungary), a wholly owned subsidiary of Microsoft Corporation, has agreed to pay a criminal fine of more than $8.7 million to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) arising out of a bid rigging and bribery scheme in connection with the sale of Microsoft software licenses to Hungarian government agencies and the false recording of the corrupt payments as legitimate customer discounts on Microsoft Corporation’s financial records. U.S. Attorney Geoffrey S. Berman said: “U.S. multinational corporations must have robust policies and practices to prevent their foreign subsidiaries from participating in bribery that result in false and misleading entries in the books and records of the parent company. We will hold subsidiaries and, where appropriate, the parent corporations accountable wherever FCPA violations occur.” FBI Assistant Director William F. Sweeney Jr. said: “Microsoft Hungary created a conduit for illegal activity, one that permeated the layers of oversight put in place to protect against violations of the Foreign Corrupt Practices Act. The $8.7 million penalty imposed today makes it abundantly clear that any alleged violation of the FCPA, whether on behalf of an individual or entity, will not be taken lightly.” According to Microsoft Hungary’s admissions, Microsoft Hungary contracts with third party companies to sell licenses for Microsoft products to Hungarian government agencies. These intermediaries purchase the licenses from Microsoft Hungary, then resell the licenses to the end customers. Beginning at least 2013 and continuing until at least 2015, senior executives and other employees of Microsoft Hungary participated in a bribery and bid rigging scheme in connection with the sale of Microsoft software licenses to Hungarian government agencies. In furtherance of that scheme, certain Microsoft Hungary executives and employees falsely represented to Microsoft that steep discounts were necessary to conclude deals with resellers who bid for the opportunity to sell Microsoft licenses to government customers. As a result, those discounts were falsely recorded in Microsoft Corporation’s financial records as legitimate business expenses. In actuality, the savings were not passed on to the government customers, but were used by the resellers, in part, to pay bribes to Hungarian government officials. The tainted deals resulted in at least $14,586,325 in profits to Microsoft Corporation. Microsoft Hungary entered into a nonprosecution agreement and agreed to pay a criminal fine of $8,751,795 to resolve the matter. This resolution was based on several factors. Although Microsoft Hungary did not voluntarily self-disclose the misconduct, Microsoft Hungary received credit for its and Microsoft Corporation’s substantial cooperation with the investigation and for taking extensive remedial measures. For example, Microsoft Hungary terminated four licensing partners, and Microsoft Corporation has implemented an enhanced system of compliance and internal controls, company-wide, to address and mitigate corruption risks. Accordingly, the criminal fine reflects a 25 percent reduction off the bottom of the applicable U.S. Sentencing Guidelines fine range for the company’s full cooperation and remediation. In a related matter with the Securities and Exchange Commission (SEC), Microsoft Corporation agreed to pay to the SEC disgorgement and prejudgment interest totaling approximately $16,565,151 for conduct including Hungary. Mr. Berman praised the outstanding investigative work of the FBI. The case is being handled by the Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Sarah Lai is in charge of the prosecution, with support from Trial Attorneys Derek J. Ettinger and Della Sentilles of the Criminal Division’s Fraud Section. Updated July 23, 2019 Topic Foreign Corruption Component USAO - New York, Southern Press Release Number: 19-228

Press Release Hungary Subsidiary Of Microsoft Corporation Agrees To Pay $8.7 Million Criminal Fine To Resolve Foreign Bribery Case Monday, July 22, 2019 Share FacebookLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. XLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. LinkedInLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. Email For Immediate Release U.S. Attorney's Office, Southern District of New York Geoffrey S. Berman, United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that Microsoft Magyarország Számítástechnikai Szolgáltató és Kereskedelmi Kft. (Microsoft Hungary), a wholly owned subsidiary of Microsoft Corporation, has agreed to pay a criminal fine of more than $8.7 million to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) arising out of a bid rigging and bribery scheme in connection with the sale of Microsoft software licenses to Hungarian government agencies and the false recording of the corrupt payments as legitimate customer discounts on Microsoft Corporation’s financial records. U.S. Attorney Geoffrey S. Berman said: “U.S. multinational corporations must have robust policies and practices to prevent their foreign subsidiaries from participating in bribery that result in false and misleading entries in the books and records of the parent company. We will hold subsidiaries and, where appropriate, the parent corporations accountable wherever FCPA violations occur.” FBI Assistant Director William F. Sweeney Jr. said: “Microsoft Hungary created a conduit for illegal activity, one that permeated the layers of oversight put in place to protect against violations of the Foreign Corrupt Practices Act. The $8.7 million penalty imposed today makes it abundantly clear that any alleged violation of the FCPA, whether on behalf of an individual or entity, will not be taken lightly.” According to Microsoft Hungary’s admissions, Microsoft Hungary contracts with third party companies to sell licenses for Microsoft products to Hungarian government agencies. These intermediaries purchase the licenses from Microsoft Hungary, then resell the licenses to the end customers. Beginning at least 2013 and continuing until at least 2015, senior executives and other employees of Microsoft Hungary participated in a bribery and bid rigging scheme in connection with the sale of Microsoft software licenses to Hungarian government agencies. In furtherance of that scheme, certain Microsoft Hungary executives and employees falsely represented to Microsoft that steep discounts were necessary to conclude deals with resellers who bid for the opportunity to sell Microsoft licenses to government customers. As a result, those discounts were falsely recorded in Microsoft Corporation’s financial records as legitimate business expenses. In actuality, the savings were not passed on to the government customers, but were used by the resellers, in part, to pay bribes to Hungarian government officials. The tainted deals resulted in at least $14,586,325 in profits to Microsoft Corporation. Microsoft Hungary entered into a nonprosecution agreement and agreed to pay a criminal fine of $8,751,795 to resolve the matter. This resolution was based on several factors. Although Microsoft Hungary did not voluntarily self-disclose the misconduct, Microsoft Hungary received credit for its and Microsoft Corporation’s substantial cooperation with the investigation and for taking extensive remedial measures. For example, Microsoft Hungary terminated four licensing partners, and Microsoft Corporation has implemented an enhanced system of compliance and internal controls, company-wide, to address and mitigate corruption risks. Accordingly, the criminal fine reflects a 25 percent reduction off the bottom of the applicable U.S. Sentencing Guidelines fine range for the company’s full cooperation and remediation. In a related matter with the Securities and Exchange Commission (SEC), Microsoft Corporation agreed to pay to the SEC disgorgement and prejudgment interest totaling approximately $16,565,151 for conduct including Hungary. Mr. Berman praised the outstanding investigative work of the FBI. The case is being handled by the Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Sarah Lai is in charge of the prosecution, with support from Trial Attorneys Derek J. Ettinger and Della Sentilles of the Criminal Division’s Fraud Section. Updated July 23, 2019 Topic Foreign Corruption Component USAO - New York, Southern Press Release Number: 19-228