Microsoft Whistleblower Alleges Corruption, Financial Bribery Schemes: SEC and DOJ Reluctant to Investigate? 

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Blue Ash - Circa November 2020: Microsoft Sales office. Microsoft plans for a future beyond the XBOX, Surface and cloud computing.

In a recent article, Microsoft whistleblower Yasser Elabd alleges that corruption and bribery is rampant at the technology company. He writes that he was subjected to retaliation and eventually let go from his position after working for the company for twenty years after trying to raise concerns about the illicit behavior. Elabd also claims that he has submitted complaints and evidence of these practices to the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) but the agencies seem uninterested in pursuing his allegations.

Elabd was recruited to work for Microsoft in 1998 and “helped bring the company’s products throughout the Middle East and Africa for the next 20 years,” his article states. He established contracts and sold “licensing and solutions” to government agencies around the world. Elabd explains that Microsoft is able to achieve vast growth in this way by using a “network of partners known as Licensing Solution Partners, who are authorized to engage with large public customers because they possess certain technical and business competencies.” According to Elabd, these partners would then “take a share of Microsoft’s licensing sales revenue, usually 10-15 percent.”

In his article, Elabd writes: “One way Microsoft closes deals using these partners is to create a business investment fund to pay for training or pilot projects that could cement longer-term deals. As the director of public sector and emerging markets for the Middle East and Africa, I had oversight of the requests for these funds.”

He details an instance in 2016 in which “a request came through in the amount of $40,000 to accelerate closing a deal in one African country.” The request raised red flags for Elabd, who noticed that “the customer did not appear in Microsoft’s internal database of potential clients” and “the partner in the deal was underqualified for the project’s outlined scope.” In fact, the partner was technically not allowed to be doing business with Microsoft, as “he had been terminated four months earlier for poor performance on the sales team.”

He raised concerns about the request “with the Microsoft services architect who wrote the request” and then brought the issue to his manager and the human resources and legal departments. “I took the business investment fund very seriously, and wondered why we would be giving money to a partner who could not achieve the desired results,” writes Elabd. “The legal and HR teams put a stop to the $40,000 spend, but to my surprise, did not look deeper into the Microsoft employees who were orchestrating the fake deal.”

Elabd writes that the manager of the Microsoft services architect to whom he had initially brought his concerns was “angry that [Elabd] had bypassed him.” This manager soon became Elabd’s manager, and in a one-on-one meeting told Elabd that “our job is to bring as much revenue as we can to Microsoft.” The manager told Elabd: “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.”

According to his piece, Elabd responded to the manager by saying that he would not be a blocker “unless it violated company policy,” which made the manager even angrier. “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,” Elabd writes.

Elabd then met with the manager’s boss, who was a vice president. The vice president suggested a meeting with all three parties, but after the meeting never transpired, Elabd emailed Satya Nadella, Microsoft CEO, and an HR executive, informing them that he “felt mistreated by this manager.” The vice president Elabd talked with prior told Elabd that by looping in Nadella, he had “booked a one-way ticket out of Microsoft.”

Elabd describes being retaliated against after this exchange, being left out of important deals and prevented from attending work trips. “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,” Elabd writes.

Microsoft then put Elabd on a “performance improvement plan.” The company fired Elabd in June of 2018 after he “refused to acknowledge the plan.” He expresses that initially he was “shocked to be fired” given his accomplishments at the company. “But in 2020, a much clearer picture emerged of why executives had wanted to shut down my lines of questioning. A former colleague based in Saudi Arabia who had become upset by what he saw taking place at Microsoft began forwarding me emails and documentation—and I learned that the corruption went much deeper than I had suspected.”

Elabd writes: “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.” This meant that the individuals involved in the schemes would be pocketing the money. Elabd writes about instances in different countries in which discounts of millions of dollars “were not passed through to the end customers.”

“Were an audit conducted for all of the partners using these practices, I believe the sums of money found to be stolen would be enormous. Where did these millions of dollars go?” Elabd questions. Additionally, the documents Elabd’s former colleague provided “clarified other situations that had raised red flags for me years before.” He describes instances in which Microsoft clients, in these cases public entities and agencies in foreign governments, complained that they were paying for Microsoft licenses they did not have.

Elabd alleges that “[a]nother common practice revolved around creating fake purchase orders, which sales managers presumably used to increase their compensation. In 2017, it was suspected that one sales manager forged the signature of the Saudi National Guard’s deputy minister on a fake Microsoft purchase order. I have evidence that people on Microsoft’s legal, HR, and finance teams—as well as officials from the region’s public sector—knew about this forgery.” Elabd writes that he heard that after the sales manager threatened to speak out about the corruption he had witnessed, “Microsoft paid [the sales manager] to leave quickly and quietly, took no legal action against him, and did not report the forgery.”

There are five other former Microsoft employees, Elabd claims, who have been retaliated against for raising concerns “about inconsistencies in finances.” He alleges that Microsoft is turning a blind eye to the corrupt acts and provides more examples of the allegations of corruption at the company. He points to a $25.3 million settlement Microsoft paid in 2019 to the DOJ and SEC: the settlement resolved claims that Microsoft violated the Foreign Corrupt Practices Act (FCPA).

But Elabd expresses surprise and concern that the SEC and DOJ “have both declined to investigate Microsoft over the same types of bribes in the Middle East and Africa. They acknowledged my evidence (which I submitted three times) yet did not take up the case, claiming that the current pandemic has prevented them from gathering more evidence from abroad—even though I have already provided documentation that I believe shows Microsoft is in breach of the 2019 agreement and is still participating in corrupt business practices in direct violation of U.S. law.”

His complaint to the SEC alleges that Microsoft is violating the FCPA, but he writes that because the agencies have yet to investigate, they “have given Microsoft the green light.”

“Governments across the Middle East and Africa are throwing away millions of public dollars on unused Microsoft products so a few select officials, partners, and employees can enrich themselves. Microsoft is allowing employees to steal from its own pockets and from the governments of the countries it operates in to help cement its monopoly on the continent,” Elabd concludes. “As the manager told me all those years ago, all that matters is that Microsoft earns as much money as possible. Employees who break the law in service of this goal are living lavish lifestyles, while those who speak up are ostracized and pushed out.”

The FCPA, passed by Congress in 1977, is a U.S. anti-corruption law that prohibits the payment of anything of value to foreign government officials in order to obtain a business advantage. It also contains accounting provisions which require publicly traded corporations to make and keep books and records that accurately reflect the transactions of the corporation.

In 2010, the Dodd-Frank Act, which established the SEC Whistleblower Program, added whistleblower provisions to the FCPA. Through the SEC Whistleblower Programs, qualified whistleblowers, individuals who voluntarily provide the SEC with original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recovered by the government.

In a response to Elabd’s allegations in an article from The Verge, Becky Lenaburg, Microsoft Vice President and deputy general counsel for compliance and ethics, said: “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 believe we’ve previously investigated these allegations, which are many years old, and addressed them. We cooperated with government agencies to resolve any concerns,” Lenaburg said in the article. In her comment, she also highlighted the company’s “commitment to ethical practices, pointing to the ‘standards of business’ training all employees are required to take, including specific coaching on how to report bribery incidents like the ones described by Elabd.”

Read Elabd’s piece here.

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