I was prepared to get my pitchfork out, but after reading I'm struggling to connect the dots. This article is scant on details of what illegal or favorable behavior Microsoft is expecting in exchange for money. The only concrete mention is a previous SEC filing that has nothing to do with this whistleblower. The first example about $40k doesn't seem to explain what Microsoft was actually thinking it would get for that money, let alone whether that money was illegal. At worst, it seemed to violate corporate policy, which I can understand if that got missed in an initial review. The other examples don't sound like bribery on Microsoft's part so much as resellers squeezing as much out of a deal as they can get away with. I call that a problem with the reseller model.
I imagine Microsoft looks the other way while resellers make lots of money because, realistically, being in some of the markets mentioned is impossible unless you're connected with the right person. While not necessarily efficient, I wouldn't call that illegal or even unethical without a lot more detail than this article provides.
But maybe I'm missing something. This article reads as poorly researched, and the whistleblower comes off as disgruntled more than ethical.
Edit: It's worth noting that the whistleblower's original words are a little more well-written than this article [1]. However, it makes the contrast clearer between what is factual vs what is only insinuated.
The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. ("FCPA"), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.
Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.
The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls.[1]
I'm not a lawyer, but at worst it's starkly clear to me that this runs afoul of the law. Might I suggest it may be the awareness of it is the something you are missing?
You'll need to draw that line a little clearer, because it's not starkly clear to me. I'm aware of the definition of bribery. I don't think anything mentioned here describes graft as much as it describes the reseller business unless there is some law that limits the amount of money a reseller makes on a deal, or that a purchaser is required to use all of said purchase. In the Saudi example, the contractor got a great deal, but that's hardly illegal. In the Qatar example, buying more seats than you use is a common problem and any company that sells based on seats is guilty of this on some level.
For me to take this farther than "that's how reselling works," there'd need to be some signs that Microsoft employees or government officials were seeing kickbacks from these inefficient deals...basically, the resellers were the ones doing the bribing. The whistleblower seems to be insinuating that's happening, and maybe it is, but there's no hard evidence of it here or that it's something systemic that Microsoft is promoting (indeed, Microsoft would be one of the victims in that case). Without more detail on what exactly Microsoft was extracting out of these circumstances I find the whole thing vague.
> Without more detail on what exactly Microsoft was extracting out of these circumstances I find the whole thing vague.
I think the big problem here is that you've misunderstood why bribery is a criminal matter. The fact you're talking about Microsoft being "one of the victims in that case" is another sign you do not get it. Corruption itself is the problem, we're not trying to ensure Microsoft gets their $$$.
To root out corruption, the relatively less corrupt major industrialised nations agreed rules forbidding their business entities from having anything to do with such practices even via a third party. When Microsoft realises that their guy in Saudi is involved in something dodgy, their duty isn't "hide it so the big bosses don't know" or even "pay the guy off and find somebody else" but to report this corruption to the government.
These are leaches, they have to be starved, and that won't be effective so long as, like in this story, there are nods and winks and everybody pretends it's fine so long as they got paid.
If that is happening, then you're absolutely correct. However, there's no evidence that's happening...either in the Verge article or in the whistleblower's own words. All the whistleblower has presented is Microsoft's own PWC audits that resellers have been pocketing more money than policy says they should and that there are cases where company policy was violated. The leap from this evidence to bribery is, frankly, pandering to the reader's prior beliefs.
If you're saying the resellers themselves are corrupt to make a score in, say, the Saudi case, well, that's the reseller business and it's all a question of degree. There is no law that if a reseller negotiates a better rate from the vendor that they're required to pass those savings on. It's skeevy and a reason the reseller business should disappear, but it's not any different from a car salesman.
I'm in this camp here. The article does a poor job framing the actual involvement Microsoft had and the whistleblower's writeup doesn't do a good job either. They did provide instances in the original whistleblowing that bad things did happen.. but they also showed that a lot of them actually got some sort of punishment/reaction instead of just pretending situation normal. A buyer, a reseller, and a seller working together to find a price that works by lowering the cost of goods is not a bribe since you know nobody is getting paid. They seemed to be heavily extrapolating that the buyer, reseller, and the Microsoft rep are splitting the proceeds of the cost mismatch regularly outside of normal revenues for the reseller and Microsoft. There needed to be a lot more sensible storytelling from the whistleblower pointing a finger and blowing the whistle at specific people who were doing the accused tactic.
There's a lot more extrapolation of facts into a narrative from the original whistleblower post. Trying to say that licenses that were bought that never were used was bribery is just confusing. Even I have licenses for things kicking around that I never installed but intended to someday. Whole projects can get planned, licenses purchased, and then for one reason or another scrapped but the licenses (or other material from vendors) are still 'bought.' For the bribery to mean anything (or like that other commenter who tried to whip out FCPA randomly) someone has to get enriched by the experience other than the reseller selling something and paying Microsoft its share. The whistleblower post didn't do that well.
There is just not a lot of good information that was provided by the whistleblower to actually connect all of this money that he estimates at $200 million to any sort of reality. Do I think he has enough beef for a employment law retaliation case (if he was in jurisdiction US law)? Probably. Did some people commit bribes and Microsoft was fined/Microsoft fired people? Probably. Do some resellers who are external to Microsoft end up violating the FCPA or 'normal US business ethics' in some regions? Definitely. But they aren't in the US, so the right venue for whistleblowing the activity is in whatever-country-in-question under their laws. Just based on the article and whistleblower post it sounds like there is just an assumption that micro problems in his local leadership were macro problems. I am not convinced.
>A buyer, a reseller, and a seller working together to find a price that works by lowering the cost of goods is not a bribe since you know nobody is getting paid.
They're not lowering the price of goods. The non-discounted amount is still charged to the end customer. The difference in the amount charged to the customer and what's paid in licensing to MS is used as a slush fund to bribe the decision maker.
>Trying to say that licenses that were bought that never were used was bribery is just confusing.
Come on, it's not that confusing. They're inflating the value of the contract so that they can skim more off.
>Do some resellers who are external to Microsoft end up violating the FCPA or 'normal US business ethics' in some regions? Definitely. But they aren't in the US, so the right venue for whistleblowing the activity is in whatever-country-in-question under their laws. Just based on the article and whistleblower post it sounds like there is just an assumption that micro problems in his local leadership were macro problems. I am not convinced.
I don't understand how you're not convinced. MS has paid a fine for the exact same behavior across multiple countries in different regions. And here is a person who has been in the thick of it for 20 years alleging the exact same scheme with documents to back it up. It's a slam dunk case.
I'm responding directly to what the whistleblower was alleging and they really didn't support an argument of their case. "I have damning information" doesn't mean anything without explaining more clearly what the damning information actually contains. Since they didn't I just can respond only to what the whistleblower wrote, and they didn't make a good case. They did not connect that their personal experience turned into an obvious out-of-channel enrichment of the buyer or the Microsoft person in cash or in kind. Asking your suppliers to reduce costs so that you can sell for the same price is normal, it happens in pretty much all industries. They are merely alleging that it was the path to nefarious acts.
If you go into the whistleblower's complaint and remove everything that is not his firsthand account there's shockingly little there around bribery. I do think that this individual has an HR legal case for being mistreated based on their writing but that has little to do with the alleged bribery. Reading an audit report that they didn't pen doesn't mean much and the findings could have been made right without their knowledge. Nobody goes back and marks findings on an original audit report 'fixed.' There is also a lot of jumping to conclusions. The only thing in the whistleblower post that I can see that they provided as concrete issue that they were firsthand involved with was a sum of $40,000 which is a great distance away from the $200 MM they are suggesting. If it was as prevalent they would have multiple transactions they were directly aware of and the sum would be much higher than $40,000. There is an assumption laden in the article that the only outcome for any discrepancy are bad actors enriching themselves instead of negligence or incompetence. Bringing in other cases where Microsoft was fined is irrelevant for the purpose of their whistleblowing, nobody cares about the other crimes we already know about we care about the crime you saw.
Too much of this sounds like a jilted employee on a PIP and not enough of it was just straight facts and clear cause for action. You don't need to craft a narrative, just whistleblow on what you saw.
The problem with your argument, which has been pointed out to you already, is that these allegations are based on nothing more than circumstances that look abnormal. Overselling or underusing seats is not proof that bribery took place. The shear $ amount of unused software looks particularly bad until you realize those are all the licenses that were purchased for all of the schools, and all school government related work for a country with millions of people. What's more, those licenses could have been purchased as part of an initiative that ran out of funding before it could be completed. Poor government planning is so ordinary as to be boring.
This so called whistle blower is pointing to virtually public information and saying, "but I think it's obvious!" The problem is that it only looks obvious to someone who hasn't thought about what else could be going on. Maybe it's impossible for so many suspicious events, but it's at least equally possible that if bribes are going on, Microsoft has no knowledge of it.
Allegedly, a foreign employee of Microsoft bribed a foreign official off US soil. The transaction was reported to accounting and controlled by some budget, and no one in the US was aware of the bribery. Which rule was broken, and by which person under the jurisdiction of the law?
The same article says to maintain counsel or ask the DOJ for advice if you want to operate in a gray area of the law, implying such behavior is common.
Last I checked, Microsoft had an army of lawyers and also a good relationship with parts of the DOJ.
It's not "resellers" making money, it's apparent that MS' employees and salespeople are using fake contracts and "discounts" to funnel money to decision makers. What MS got out of it at the end of the day — a contract or perhaps some personal earmark for a salesperson — doesn't matter. Their bribes distorted the market, entrenched corruption, and made the lives of people living in these countries worse. It should be punished to the fullest extent of the law.
This section in particular is damning,
> In another instance, he saw a contractor for the Saudi interior ministry receive a $13 million discount on its software — but the discount never made it back to the end customer. In another case, Qatar’s ministry of education was paying $9.5 million a year for Office and Windows licenses that were never installed. One way or another, money would end up leaking out of the contracting process, most likely split between the government, the subcontractor, and any Microsoft employees in on the deal.
These "subcontractors" are usually relatives of people in Government, and they're bribing these officials, then splitting money between all of them in exchange for contracts. This is illegal under the Foreign Corrupt Practices Act.
> In 2016, a request came through in the amount of $40,000 to accelerate closing a deal in one African country. [...] On top of that, the partner in the deal was underqualified for the project’s outlined scope, and he wasn’t even supposed to be doing business with Microsoft: he had been terminated four months earlier for poor performance on the sales team, and corporate policy prohibits former employees from working as partners for six months from their departure without special approval.
> I brought these issues up with the Microsoft services architect who wrote the request, asking why she didn’t take the work in this case to our very capable in-house team, Microsoft Services. She said our in-house daily rate is very expensive, and she needed a less expensive team to handle the pilot.
and then,
> Meanwhile, the woman’s manager sought me out, angry that I had bypassed him; I told him I was only following company policy. Soon after, he was promoted and became my manager. He immediately scheduled a one-on-one meeting, in which he told me our job is to bring as much revenue as we can to Microsoft. He added, “I don’t want you to be a blocker. If any of the subsidiaries in the Middle East or Africa are doing something, you have to turn your head and leave it as is. If anything happens, they will pay the price, not you.” When I said I would not block anything unless it violated company policy, his tone took a sharp turn. He shouted that I was not capable of doing this business and couldn’t close deals. But my 18-year track record spoke for me.
He escalates, but no one does anything, so he writes to the CEO.
> The aforementioned vice president immediately got back in touch with me, to say that by escalating the matter to Nadella, I had just “booked a one-way ticket out of Microsoft.”
> A general manager told me people panicked when I came to the subsidiary offices, and I had become “one of the most hated persons in Africa.” Only later did I realize this was because I asked too many questions; I was stopping people from skimming money off their deals.
This is a classic culture of corruption. It doesn't get starker than this.
> Examining an audit of several partners conducted by PricewaterhouseCoopers, I discovered that when agreeing to terms of sale for a product or contract, a Microsoft executive or salesperson would propose a side agreement with the partner and the decision maker at the entity making the purchase. This decision maker on the customer side would send an email to Microsoft requesting a discount, which would be granted, but the end customer would pay the full fee anyway. The amount of the discount would then be distributed among the parties in cahoots: the Microsoft employee(s) involved in the scheme, the partner, and the decision maker at the purchasing entity—often a government official.
I get that's the insinuation, but there's a leap the reader is expected to make between "this middleman made a lot of money" and "bribes were clearly happening" without further investigation. If a car salesman convinces me to pay more for a car than someone else pays that doesn't mean someone was bribed; the rest is a matter of degree.
I get that bribery happens, and I get that the SEC stepped on Microsoft employees for bribery in Hungary. I also get the impact that bribery and corruption has on lives. None of that is material to what's being said about this situation. In fact, it's relying on the reader's passion to make these leaps.
> For five (5) of 12 sample enrollments, complete End Customer pricing information was not provided and therefore we were unable to determine whether the related discounts were passed through. We requested Exceed IT Services to obtain end customer purchase order, contract, invoicing and payment proof from the additional resellers, however after multiple requests and follow ups during the audit, these documents were not made available.
And it shows $13,693,903 in discounts as "missing" for one customer. Why do you think that the "documents were not made available"?
And why do you think that MS looked the other way?
I am unsure why you're going to bat for MS here. But it's not just "passion" and "leaps", there's millions of missing dollars at play and MS isn't the least bit concerned. Why do you think that is? Does MS not care that money is magically disappearing between it and Government customers?
Are they that irresponsible?
There are two explanations here, corruption or stupidity. They're either too stupid to read the reports that the auditors wrote about the missing money, or they're corrupt and that missing money is buying them something.
This is going to be my last word on the topic, because as you say my original comment is being painted into going to bat for MS, which hasn't been my intention. I've read the Verge article, the whistleblower's original words, and looked at the PWC slides. I understand the numbers involved. You ask me why I think MS looked the other way. I don't know. This article is already speculating enough, and my comment was to call that out. I've already put more effort into clarifying myself than my investment into the issue should really dictate.
As you say, this is down to corruption or stupidity, and as Hanlon's razor goes, "never blame on malice what can be explained by stupidity." I look forward to the SEC investigating the whistleblower's accusations. Whether there's bribery or not, it's worth looking into. I don't think there's enough to convict anyone on based on what's offered here. I hope to be reading more detail on what exactly has been happening here at some point. However, I do see a world where this was stupidity. It happens quite often.
I think the other commenters have raised valid points that you seem to be willfully disregarding. It’s actually similar to when you've denied Amazon has a “hire to fire” policy, or a toxic PIP culture.
I guess engineering managers like us are trained to turn a blind eye to bad ethics. We spend most of our work time slavishly rationalizing the power structure so we build an instinct for bending the knee outside of work.
I'm not quite sure where you get those ideas. I've only ever said that Amazon absolutely has a comp structure designed to kick people out within four years, and that I thought their stated pip failure rate of ~30% was low based on my personal experience there and elsewhere.
I do tend to think individual managers are people. This is true.
We are, however, so off the plot of this thread getting into ad hominem territory now that we're moments away from Godwin's Law. Best to leave it here.
It's not uncommon for corporations to pay money in bribes because in many countries it's a cost of doing business; it would be otherwise impossible to get anything done.
If a company is required to pay, say, $3,000 to a corrupt official to pass a checkpoint and get access to an area where they have some business to tend to, then scale that economically to a multinational conglomerate like Microsoft who might do business in that same area 35 times in a week for various reasons and the amount of bribe money flowing out of their coffers increases to scale.
I imagine Microsoft looks the other way while resellers make lots of money because, realistically, being in some of the markets mentioned is impossible unless you're connected with the right person. While not necessarily efficient, I wouldn't call that illegal or even unethical without a lot more detail than this article provides.
But maybe I'm missing something. This article reads as poorly researched, and the whistleblower comes off as disgruntled more than ethical.
Edit: It's worth noting that the whistleblower's original words are a little more well-written than this article [1]. However, it makes the contrast clearer between what is factual vs what is only insinuated.
1: https://www.lioness.co/post/microsoft-is-using-illegal-bribe...