December 22, 2024

U.S. Said to Look Into Microsoft Bribery Allegations

The United States Department of Justice and the Securities and Exchange Commission have both opened preliminary investigations into the bribery allegations involving Microsoft in China, Italy and Romania, according to the person, who declined to be named because the software company considers the inquiry a confidential legal matter.

Microsoft’s practices in those countries are being looked at for potential violations of the Foreign Corrupt Practices Act, a federal law that prohibits American companies from making illegal payments to government officials and others overseas to further their business interests.

In a blog post Tuesday afternoon, John Frank, vice president and deputy general counsel of Microsoft, said the company could not comment about continuing inquiries. Mr. Frank said it was not uncommon for such government reviews to find that allegations were without merit.

“We take all allegations brought to our attention seriously and we cooperate fully in any government inquiries,” Mr. Frank said in the blog post. “Like other large companies with operations around the world we sometimes receive allegations about potential misconduct by employees or business partners and we investigate them fully regardless of the source. We also invest heavily in proactive training, monitoring and audits to ensure our business operations around the world meet the highest legal and ethical standards.”

The Wall Street Journal first reported news of the investigations on its Web site on Tuesday.

Michael Passman, a spokesman for the Justice Department, said the department had a policy of not confirming or denying the existence of investigations. A spokesman for the S.E.C. could not be reached immediately for comment.

The allegations in China were first shared with United States officials last year by an unnamed whistle-blower, who had worked with Microsoft in the country, according to the person briefed on the inquiry. The whistle-blower said that a Microsoft official in China directed the whistle-blower to pay bribes to government officials to win business deals, this person said. After this incident, the whistle-blower had a business conflict with Microsoft, the person added.

In 2010, Microsoft itself conducted an internal investigation of the allegations, with the help of an outside law firm, that found no evidence of improper behavior, this person said.

The federal agencies are also looking at Microsoft’s relationship with outsiders in Romania and Italy, including software resellers and consultants, who are said to have bribed government officials to secure contracts for government business, this person said.

Edward Wyatt contributed reporting from Washington and Ben Protess from New York.

Article source: http://www.nytimes.com/2013/03/20/technology/us-said-to-look-into-microsoft-bribery-allegations.html?partner=rss&emc=rss

Justice Dept. Issues Guidance on Foreign Bribes

WASHINGTON — With billions of dollars in potential fines and foreign investment in the balance, the Justice Department and the Securities and Exchange Commission on Wednesday released long-awaited guidance on how prosecutors interpret and enforce a federal anticorruption law that bans American businesses from bribing officials overseas.

The 120-page “resource guide” to the Foreign Corrupt Practices Act lays out the government’s understanding of and standard practices for the 1977 law. The statute sat largely dormant for decades, but a recent explosion of enforcement has struck terror into corporate boardrooms, leading to large fees for compliance lawyers and enormous fines and settlements paid to the government.

The detailed guidance — including numerous case studies illustrating what would and would not be considered a violation of the law — is particularly important because cases of foreign corrupt practices rarely get adjudicated. Corporations are generally inclined to settle potential cases without a trial because being indicted can cripple a business.

As a result, judges rarely weigh in on whether prosecutors’ interpretation of the statute in ambiguous scenarios — such as when an employee of a state-owned enterprise, like a utility, should be considered a “foreign official” and therefore covered by the law — is accurate.

The guide — signed by Lanny A. Breuer, the assistant attorney general for the Justice Department’s criminal division, and Robert S. Khuzami, the director of enforcement for the S.E.C. — lays out a series of factors in considering who counts as a foreign official. Among the factors, for example, is whether a foreign government controls an entity, like a utility, or has only a minority stake in it.

It also discusses gift-giving at length, and addresses when gifts to an overseas charity — or travel and entertainment provided to foreign officials who may be considering issuing a contract to a business — amount to a bribe.

For example, the guidance says that it would not violate the statute if a company provided foreign officials, like employees of a state-owned electricity commission, promotional T-shirts at a trade show, picked up a bar tab or bought “a moderately priced crystal vase” as a wedding gift. There would also be no violation if the company paid for the foreign visitors’ travel to a city in the United States where the company has facilities, including taking them to a baseball game or the theater.

However, it says, it would violate the law to pay for foreign officials and their spouses to travel to a city like Las Vegas or Paris if the company has no significant facilities there. That would display a “corrupt intent” to curry favor with the officials because “the trip does not appear to be designed for any legitimate business purpose” and “is extravagant.”

    “The fight against corruption is a law enforcement priority of the United States,” Mr. Breuer said in a statement. Enforcement of the statute “is critical to protecting the integrity of markets for American companies doing business abroad, and we will continue to make clear that bribing foreign officials is not an acceptable shortcut.”

Mr. Khuzami added: “Investors must have faith that the economic performance of public companies reflects lawful considerations of markets, price and product rather than a mirage resulting from bribery and corruption.” 

Paul E. Pelletier, a former Justice Department prosecutor who worked on Foreign Corrupt Practices Act investigations, said the guidance was unlikely to be “groundbreaking” for lawyers who already specialize in the law in terms of “providing bright lines that don’t already exist,” but would be “important and useful” for in-house lawyers at companies.

“I think it’s important because people want it and it provides one-stop shopping,” he said. “It’s going to give us good boundaries as to what the government’s present view is as to certain issues, and that’s always good and helpful. And it’s going to raise the profile of the Foreign Corrupt Practices Act even more.”

Congress enacted the Foreign Corrupt Practices Act as part of a series of reforms after the Watergate scandal. For its first few decades, prosecutors rarely invoked the statute. But in recent years, enforcement has soared, from just two actions in 2004 to 48 in 2010.

The change dates to the collapse of Enron a decade ago. It led to tougher financial laws, like requiring top executives at publicly traded companies to certify that their firms’ books were accurate, which in turn forced them to pay closer attention to payments made overseas. The 2010 Dodd-Frank law further ratcheted up pressure by giving corporate whistle-blowers a financial incentive to report violations.

Against that backdrop, beginning with the Justice Department in the George W. Bush administration, prosecutors began developing more expansive theories about the type of graft that the statute covered. The department and the S.E.C. also began driving up fines by requiring companies to disgorge profits as a condition of settling cases without an indictment, driving up fines to record levels, including $800 million paid by Siemens in 2008.

Businesses have called for greater clarity, complaining that the law is being stretched beyond its intent and that it is not clear what conduct is now considered off limits; the guidance is expected to be closely analyzed by corporate lawyers who help firms comply with the law and respond when a violation is uncovered.

Article source: http://www.nytimes.com/2012/11/15/business/justice-dept-issues-guidance-on-foreign-bribes.html?partner=rss&emc=rss

Johnson & Johnson Settles Bribery Complaint

Intriguingly, prosecutors said that Johnson Johnson had provided “significant assistance” in their investigation of others in the industry, resulting in a reduced criminal fine for the health conglomerate. At least a dozen other major drug and device makers are under investigation for similar crimes.

A criminal complaint filed by the Justice Department against a Johnson Johnson subsidiary that makes knee and hip implants quoted internal company e-mails as stating that providing “cash incentives to surgeons is common knowledge in Greece,” and that, were the company to stop paying bribes, “we’d lose 95% of our business by the end of the year.”

In a written statement, the company said that it originally reported its illegal marketing activities to the government in 2007. “We are deeply disappointed by the unacceptable conduct that led to these violations,” said William C. Weldon, the company’s chairman and chief executive.

The case is the latest in a string of criminal investigations into illegal marketing practices by drug and device companies. Again and again, companies have agreed to large-sum settlements in cases involving claims that they bribed doctors in the United States to prescribe or implant medical products in patients who are entirely unaware of their doctors’ financial incentives. With the settlement agreement from Johnson Johnson, prosecutors have now begun penalizing companies in foreign bribery cases as well.

According to statements by the Justice Department and the Securities and Exchange Commission, the payments violated the Foreign Corrupt Practices Act, which outlaws bribes paid to foreign government officials. Since health systems in much of the rest of the world are government-run, doctors are considered government officials.

For Johnson Johnson, the settlement comes at a bad time. The company has issued more than 50 product recalls since the start of last year involving such household brands as Tylenol, Motrin, Rolaids and Benadryl. Last year, it recalled two popular hip implants that a recent study suggested may fail early in close to half of the patients who receive them. The recalls came long after surgeons warned the company that the implants were defective.

Mr. Weldon has denied that the company’s many missteps suggest broader problems in the company’s management or its structure as a set of loosely affiliated subsidiaries. In its statement, Johnson Johnson said that it also “hopes to reach a settlement of a related investigation by the U.K. Serious Fraud Office in several days.” To add insult to injury, the company admitted as part of its deferred prosecution agreement with the government to having paid kickbacks to the Iraqi regime of Saddam Hussein under a United Nations oil-for-food program that investigations have since found was rife with fraud.

Article source: http://www.nytimes.com/2011/04/09/business/09drug.html?partner=rss&emc=rss