Microsoft is tied to hundreds of millions of dollars in foreign bribes, whistleblower alleges

Yasser Elabd noticed a $40,000 payment to a client in Africa that didn't smell right. Money from Microsoft's business investment fund was used to make the payment. The customer named in the request was not on the internal client list. He was a former Microsoft employee who had been terminated for poor performance and had left the company so recently that its rules would have barred him from approval.

It was suspicious, more like a bribe than a proper business request, but when he pushed for more details, other managers started to push back. The payment was stopped but there were no consequences. He thought his colleagues were more comfortable with this kind of payment than he was.

In the two years that followed, Elabd says he did everything in his power to stamp out these quiet bribes, a fight that made him a pariah among his colleagues and eventually cost him his job. Looking back, he believes Microsoft preferred to let phony contracts slip through and accept the associated cash.

In an essay published Friday by Lioness, Elabd alleged widespread bribes through Microsoft's foreign contract business. More than $200 million is spent each year on bribes and kickbacks linked to the company, often in countries like Nigeria, Zimbabwe and Saudi Arabia. He thinks more than half of the salespeople and managers took part. It is a stunning look at the ongoing corruption associated with international tech contracting and Microsoft's ongoing struggles to contain it.

As director of emerging markets for the Middle East and Africa, Elabd saw many different versions of the problem. Sometimes they were suspicious requests from the business investment fund. He saw a contractor for the Saudi interior ministry get a $13 million discount on its software, but it never made it back to the end customer. In another case, the ministry of education in the state of Qatar paid over $9 million a year for Office and Windows licenses that were never installed. Money leaking out of the contracting process is most likely split between the government, the subcontractor, and any Microsoft employees in on the deal.

In countries where the government is the primary customer and mid-level bureaucrats see bribes as part of the cost of doing business, this kind of corporate bribery is a widespread problem. Billions of dollars are lost to bribes each year, according to the World Economic Forum. It is difficult to estimate the portion of the scam where international companies pay off local decision-makers to secure their business or drum up sham deals just to loot the treasury. The cost is usually paid for by the country's taxpayers, and often in nations with little money to spare, it is diverted to the bureaucrats and sub-contractors. Part of the money is sent to parent companies in order to make them look bad.

It is a challenge for any multinational company, but it was made more difficult by the experience of Microsoft. They won't promote you if you're doing the right thing.

Microsoft emphasized its commitment to ethical practices, pointing to the "standards of business" training all employees are required to take.

"We are committed to doing business in a responsible way and always encourage anyone to report anything they see that may violate the law, our policies, or our ethical standards." We worked with government agencies to resolve any concerns.

In the past, Microsoft has had difficulty with foreign bribes. A senior executive at Hungary was found to have inflated margins as part of a bribery scheme. More than $440,000 in marketing funds were diverted to gifts for employees of the Saudi government, according to a separate SEC case. Both cases were settled by Microsoft in 2019.

Microsoft president Brad Smith wrote an open letter to employees after the settlement, describing the behavior as completely unacceptable and emphasizing the need for robust internal oversight.

The essay written by Elabd tells a different story. He says he was able to stop the initial Nigeria request, but the bigger issues went unaddressed. A manager called him in for a heated discussion after connecting to the request.

The manager told him he didn't want him to be a blocker. The manager told him to turn his head and leave it as is.

In the months that followed, he was left off of deals. Travel requests that used to be approved were suddenly blocked. He left Microsoft after he refused a performance improvement plan.

In the years since, he has tracked reports of bribes coming from several countries, all involving Microsoft and its subsidiaries. He brought the reports to the Securities and Exchange Commission, hoping they would take action, but he says he has seen little action from the agency. The SEC didn't respond to a request for comment.

Under the Foreign Corrupt Practices Act, this type of bribe is illegal, but prosecutions tend to rely on more than one incident. They are going to look at the company's internal efforts to stop corruption.

The Justice Department's recent focus on repeat corporate offenders is a serious threat because evidence of a bad process can bring more severe punishment.

It is difficult to say where Microsoft falls on this spectrum. When investigations failed to turn up evidence of wrongdoing, the company has blocked payments and terminated employees. The risk of losing a sales job isn't enough to fight the culture of corruption.

They never took legal action against these employees because they knew they were stealing the company's money.