Reporting by XinZhiyuan
In June 2019, Yasser Elabd, a former Microsoft executive, met with staff at the U.S. Securities and Exchange Commission, the FBI, and the Office of the Attorney General to discuss his allegations that Microsoft ignored bribery by subsidiaries in the Middle East and Africa.
However, more than a year on, the SEC has still not made a decision on Elabd's allegations. The agency has been assured him that the team in charge of his case will soon make a decision on whether to file charges against Microsoft.
Finally, in early March 2022, the supervising agent in charge of Elabd's report told his lawyers that the SEC was closing the case because it did not have the resources to conduct inquiries and investigations abroad during the COVID-19 pandemic.
What kind of bribery is this former Microsoft employee complaining about? Why is this happening?
Those who obstruct bribery are ostracized by their colleagues in the company
In 2016, Yasser Elabd, a former Microsoft employee and then head of marketing for emerging markets in the Middle East and Africa, noticed that Microsoft had paid $40,000 to a customer in Africa.
The money came from Microsoft's Commercial Investment Fund — money to close deals and open new lines of business. But the customers mentioned in the transfer request are not customers at all, at least not according to the company's internal customer list.
The recipient is a former Microsoft employee who has just been fired for poor performance. And he recently left the company so much that the company's regulations would prohibit him from receiving payments.
The spending was suspicious and more like a bribe than a legitimate business transfer — but when Elabd asked for more details, other business managers began to thwart it.
Eventually, the payment stopped, but did not continue below. It seemed that few people at Microsoft were interested in digging deeper into the truth of the matter, and Elabd began to think that his colleagues were more willing to accept the payment method than he was.
Over the next two years, Elabd said he did everything he could to stamp out the quiet bribes — a struggle that made him a freak among his colleagues and ultimately cost him his job.
But in retrospect, he argues that Microsoft was not interested in stopping bribery payments, preferring to turn a blind eye to the fake contracts and acknowledge the money in question.
Same company, different ways of paying bribes
On March 25, 2022, Elabd exposed his experience in an article published by Lioness, the platform that exposed the shady scene, claiming that Microsoft had engaged in widespread bribery through foreign contract businesses.
Elabd estimates that the company spends more than $200 million a year on bribes and kickbacks, often in countries such as Ghana, Nigeria, Zimbabwe, Qatar and Saudi Arabia.
For the region where he works, he believes more than half of the salespeople and managers are involved in bribery. If true, this is alarming news of Microsoft's lack of curbing continued corruption related to international technology contracts within the company.
As the head of marketing for emerging markets in the Middle East and Africa, Elabd has seen many different versions of bribery.
In the case of Africa, for example, they are suspicious transfer requests from commercial investment funds.
In another example, he saw a contractor at the Saudi Ministry of the Interior receive a $13 million discount on its software deal, but that discount was never returned to the end customer.
In another example, the Qatari Ministry of Education pays $9.5 million a year for Office and Windows licenses that were never installed.
In any case, the money will eventually be drained from the process of subcontracting, and it is likely to be shared between the government, subcontractors and any Microsoft employees involved in the transaction.
This kind of corporate bribery is a common problem internationally, especially in countries where the government is the main customer of large business activities and the middle-level bureaucracy regards bribery as a reasonable cost of doing business.
The World Economic Forum estimates that the world loses more than $1 trillion a year to bribery.
The amounts involved in the various scams described by Elabd are difficult to estimate, and such arrangements typically involve international companies paying local decision-makers to ensure their operations are not disrupted, or encouraging fraudulent transactions to share the proceeds of embezzlement of public funds.
The cost of such behavior is usually borne by the taxpayers of the country, and it is usually in countries that are not rich. The benefits are shifted to bureaucrats and subcontractors, not to the people it is supposed to help.
However, as part of the arrangement, a lot of money was diverted back to the company that initiated the bribe, which unfortunately turned a blind eye to bad practices.
Microsoft is already "lying"?
This is a conundrum for any multinational company, but Elabd's experience at Microsoft has led him to believe that the company has abandoned treatment.
In an interview with The Verge, he said: "Bribery and bad behavior happens at all levels, all the executives are aware of this, they are promoting bad people who are willing to do dirty things. If you make a righteous choice, they won't promote you."
In response to media inquiries, Microsoft emphasized its commitment to ethical practices, noting the "business standards" training that all employees must receive, including specific guidance on how to report bribery incidents described by Elabd.
Becky Lenaburg, Microsoft's deputy general counsel for compliance and ethics, said: "We are committed to conducting our business responsibly and always encourage anyone to report anything they see that may violate the law, company policies or company ethical standards. We believe the company has previously investigated these multi-year-old allegations and resolved them. We work actively with government agencies to find solutions to any ills."
Microsoft has struggled in the past to address foreign bribery. According to an investigation by the U.S. Department of Justice, a senior Hungarian government official was found to have exaggerated the profit margins of Microsoft's deals with the Hungarian government during the period 2013-2015 as part of a bribery-kickback set.
A separate SEC investigation said more than $440,000 in marketing funds were diverted to "gifts" to Saudi government employees. Microsoft settled both cases in 2019, paying a total of $25 million in settlement damages to investigative agencies.
In an open letter to employees after the settlement, Microsoft President Brad Smith called the behavior "totally unacceptable" and stressed the need for strong internal oversight.
"As a company, we need to continue to work to improve the systems that help us prevent bad behavior," Smith wrote. We hope that if you find something that doesn't seem to align with your company's policies or values, you'll bring it to the attention of your company so that the little problem doesn't get bigger."
But Elabd's breaking news article tells a different story. He said he had picked up the frauds and succeeded in blocking nigeria's initial demand for bribes, but the broader issues remained unresolved.
Soon, a marketing manager related to the request called him into a heated argument.
Elabd recalls that the manager told him that if he found anything suspicious, "you have to turn your head and pretend to ignore it and leave things as they are." I don't want you to be a stumbling block."
Over the next few months, Elabd found himself unable to participate in the normal business of the company, and the once approved travel request was suddenly blocked. When Elabd rejected the "performance improvement plan" of substantial demotion and pay cuts, he lost his job and left Microsoft forever in August 2018.
In the years since, Elabd has tracked reports of bribery from Qatar, Cameroon and South Africa, all involving Microsoft and its subcontractors.
Why can't the authorities stop it?
Elabd submitted the report to the SEC in the hope that the SEC would take action, but said it had not found any real action by the agency. The SEC has not commented on the accusations.
This type of bribery is undoubtedly illegal under the U.S. Foreign Corrupt Practices Act, but a successful prosecution often relies on more than a single instance.
Leah Moushey, a senior associate at Miller & Chevalier law firm focused on FCPA cases, said prosecutors typically focus on internal efforts to stop corruption. "The prosecutor will examine whether the prosecution's compliance program was well designed, implemented in good faith, and whether there was evidence that it was effective."
While a well-documented compliance process can excuse some bad cases, evidence of poor compliance procedures could lead to harsher penalties, a particularly serious threat given the U.S. Department of Justice's recent focus on repeat bribery by businesses.
It's hard to say where Microsoft is in this range. In many of the cases cited by Elabd, the company has blocked the delivery of the money and fired the employees involved, often because the investigation failed to find evidence of misconduct.
But for Elabd, the risk of losing a job isn't enough to deter the broader culture of corruption within Microsoft.
"Microsoft has never taken any legal action against these employees, even though they know they are stealing money from the company and the government," Elabd said. The hidden message to the employees is: Do whatever you want, make as much money as you can, and it's not a big deal that you're fired."
Resources:
https://www.theverge.com/2022/3/25/22995144/microsoft-foreign-corrupt-practices-bribery-whistleblower-contracting?scrolla=5eb6d68b7fedc32c19ef33b4
https://www.lioness.co/post/microsoft-is-using-illegal-bribes-in-the-middle-east-and-africa-why-is-the-sec-turning-a-blind-eye