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Enforcement Action Dataset

 

Initiation Date:    07/22/2019  Information

Prosecuting Agency:    U.S. Securities and Exchange Commission

Type of Action:    SEC Administrative Proceeding

Docket or Case Number:    3-19260

Name of Prosecuting Attorneys:   

  • Tracy L. Davis, SEC San Francisco Regional Office

US Assisting Agencies:   

  • U.S. Department of Justice
  • Federal Bureau of Investigation

Foreign Enforcement Action/Investigation:    Unknown

Foreign Assistance:   

  • Thai Securities Exchange Commission (TH)

Origin of the Proceeding:    Unknown

Whistleblower:    Unknown

Case Status:    Resolved


Summary  Information

Microsoft Corporation, headquarted in Washington, developed, licensed, and supported a wide range of software and services, among other things. Microsoft’s stock was registered with the SEC and traded on the NASDAQ. Microsoft sold and marketed its software and services worldwide through wholly-owned subsidiaries, including subsidiaries in Hungary, Ireland, Saudi Arabia, Turkey, and Thailand.

According to the documents in this case, from at least 2013 through 2015, Microsoft’s wholly-owned subsidiary in Hungary provided payments intended for Hungarian government officials in order to obtain business for Microsoft. The payments were made through third party vendors, consultants, distributors and resellers, which Microsoft called Licensing Solution Partners. The payments were funded through excessive discounts that Microsoft’s senior executives in Hungary approved based on vague justifications without ensuring the discounts were passed on to the end government customers. Additionally, in 2014 executives in Microsoft’s wholly-owned subsidiary in Turkey approved an excessive discount in a transaction involving an unauthorized third party in connection with a government tender in circumstances where there is no evidence of services provided by the third party. Finally, from 2012 through 2015 Microsoft’s wholly-owned subsidiaries in Saudi Arabia and Thailand provided improper travel and gifts to both foreign government officials and employees of non-government customers, respectively, through slush funds maintained by their third party vendors and resellers.

In a settled administrative proceeding on July 22, 2019, the SEC ordered Microsoft to cease and desist violations of the books and records and internal controls provisions of the FCPA. In addition, the SEC ordered the company to pay disgorgement of $13,780,733 plus prejudgment interest of $2,784,417.92. The SEC issued no civil penalty in light of the $8,751,795 criminal penalty that Microsoft's Hungarian subsidiary paid in a parallel non-prosecution agreement with the DOJ.

In a related proceeding on July 22, 2019, Microsoct's Hungarian subsidiary ("MS Hungary") entered into a non-prosecution agreement with the DOJ. Under the terms of the agreement, MS Hungary agreed to pay a criminal fine of $8,751,795, which the DOJ noted reflected a 25% reduction off the bottom of the sentencing guidelines range. The reduction was based on Microsoft and MS Hungary's cooperation and remediation, though the company did not receive credit for self-reporting the matter to the agency. Under the agreement, the DOJ also required Microsoft and MS Hungary to self report on the status and implementation of the company's enhanced anti-corruption compliance for a term of three years.

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