To put an end to the criminal case and investigation against it, Microsoft announced on Monday that it has agreed to pay $25 million as settlement. The hefty fine is meant to settle the case involving the company's Hungary unit for alleged violations of US federal anti-bribery laws.
According to the US Department of Justice, Microsoft has agreed to pay $8.75 million to settle criminal fines imposed on Microsoft Hungary, a wholly-owned Microsoft subsidiary. The company will also be paying $16 million to the US Securities and Exchange Commission (SEC) to settle the charges against it.
As part of the non-prosecution agreement between the Department of Justice and Microsoft, a cease-and-desist order was given to the SEC for it to halt any further actions against the company.
The DOJ revealed in its filing that Microsoft Hungary had admitted to participating in a corruption and bribery scheme between 2013 and 2015.
The scheme involved the false inflation of profit margins on the subsidiary's software sales to various customers, including several Hungarian government agencies.
Several senior executives and employees at Microsoft Hungary were implicated to have been involved in the corruption and bribery scheme. The executives and employees allegedly asked for steep discounts, which were apparently deemed to be necessary to close deals with resellers who were directly selling Microsoft licenses to government agencies.
However, the savings from the discounts were apparently not passed on to the government customers and were instead kept for "corrupt purposes."
The substantial amount of money gained from the falsely priced sales to government customers for the "discounted" Microsoft licenses were kept on Microsoft servers in the US. This was the basis for the DOJ's case against the subsidiary as it was a clear violation of the 1977 Foreign Corrupt Practices Act. The law essentially prohibits any US company from using bribes to foreign officials to gain a business advantage over its competitors.
Shortly after Microsoft's settlement announcement, the company's president, Brad Smith, sent an email to employees updating them on the status of the case. Smith explained that the company does not tolerate any employee that breaks company policies. The executive also revealed that all of the people that were involved in the case were already removed from their positive and that Microsoft has terminated its relationships with all of its resellers in Hungary.
Smith further elaborated that the no business is perfect and that human frailty is still an underlying problem within the company, which is why strong laws and enforcement is necessary by agencies such as the DOJ and SEC.
Following the investigation on Microsoft's Hungary unit, Federal regulators have launched other investigations into Microsoft's business in countries such as China, Italy, and Romania in an attempt to uncover other illicit activities.
