In 2016, Yasser Elabd noticed a $40,000 payment to a client in Africa that didn’t smell right. The payment came from Microsoft’s business investment fund — money meant for closing deals and opening up new lines of business. But the customer named in the request wasn’t a customer at all, at least not according to the internal client list.
‘It’s going on at all levels,’ says former employee. ‘All the executives are aware of it.’
He was a former Microsoft employee who had been terminated for poor performance, and he’d 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. Eventually, the payment was stopped, but there were no broader consequences, and few seemed interested in digging deeper. He came to believe his colleagues were far 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. But looking back, he believes Microsoft wasn’t interested in stopping the payouts, preferring to let phony contracts slip through and accept the associated cash.
Elabd went public with his experiences in an essay published Friday by the whistleblower platform Lioness, alleging widespread bribery through Microsoft’s foreign contract business. Elabd estimates that more than $200 million each year is spent on bribes and kickbacks linked to the company, often in countries like Ghana, Nigeria, Zimbabwe, Qatar and Saudi Arabia. For the regions he worked in, he believes more than half of the salespeople and managers took part. If true, it’s a stunning look at the ongoing corruption associated with international tech contracting — and Microsoft’s ongoing struggles to contain it.
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As director of emerging markets for the Middle East and Africa, Elabd saw many different versions of the problem. Sometimes, as in the African case, they were suspicious requests from the business investment fund. 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.
This kind of corporate bribery is a widespread problem internationally, particularly in countries where the government is the primary customer and mid-level bureaucrats see bribes as part of the cost of doing business. The World Economic Forum estimates that more than $1 trillion is lost to bribes globally each year. It’s harder to estimate the portion involving the scam described by Elabd, 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 typically borne by the country’s taxpayers — often in nations with little money to spare — and diverted to the bureaucrats and subcontractors instead of the people it’s meant to help. But no small part of the money is sent to parent companies as part of the ruse, giving them an unfortunate incentive to turn a blind eye.
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In 2019, MICROSOFT PAID $25 MILLION TO SETTLE CLAIMS OF FOREIGN BRIBERY
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It’s a challenge for any multinational company — but Elabd’s experience at Microsoft made him think the company had given up fighting it. “It’s going on at all levels,” he said in an interview with The Verge. “All the executives are aware of it, and they’re promoting the bad people. If you’re doing the right thing, they won’t promote you.”
Reached for comment, Microsoft emphasized its 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.
“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,” said Becky Lenaburg, a VP at Microsoft and deputy general counsel for compliance and ethics. “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.”
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“I DON’T WANT YOU TO BE A BLOCKER,” HIS MANAGER TOLD HIM
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Microsoft has struggled with foreign bribery in the past. A senior executive at Hungary was found to have inflated margins as part of a bribery scheme between 2013 and 2015, according to a Justice Department investigation. A separate SEC case alleged that more than $440,000 in marketing funds were diverted to gifts for employees of the Saudi government. Microsoft settled both cases in 2019, paying a combined $25 million to investigating agencies.
In an open letter to employees after the settlement, Microsoft president Brad Smith described the behavior as “completely unacceptable” and emphasized the need for robust internal oversight. “As a company, we need to keep working on improving the systems that help us prevent bad conduct,” Smith wrote. “We hope and expect that if you see something that seems inconsistent with our policies or our values, you’ll bring it to our attention so that little problems don’t become larger.”
But Elabd’s essay tells a different story. He says he escalated the issue and successfully stopped the initial Nigeria request — but the broader problems went unaddressed. Soon, a manager connected to the request called him in for a heated conversation.
“I don’t want you to be a blocker,” he recalls the manager telling him. If he uncovered anything suspicious, the manager said, “You have to turn your head and leave it as is.”
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“COMPANIES CAN’T BURY THEIR HEAD IN THE SAND”
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In the months that followed, Elabd found himself left off of deals. Travel requests that used to be approved were suddenly blocked. When he refused a performance improvement plan, he lost the job and left Microsoft for good in August 2018.
In the years since, he’s tracked reports of bribery coming from Qatar, Cameroon, and South Africa, all involving Microsoft and its subcontractors. He even brought the reports to the Securities and Exchange Commission, hoping they would take action — but he says he’s seen little action from the agency. (Reached for comment, the SEC said the agency “does not comment on the existence or nonexistence of a possible investigation.”)
This type of bribery is illegal under the Foreign Corrupt Practices Act — but prosecutions tend to rely on more than a single incident. Leah Moushey, a senior associate at Miller & Chevalier who focuses on FCPA cases, says prosecutions often focus on a company’s internal efforts to stop corruption. “They’re going to look at whether the compliance program is well designed, implemented in good faith, and if there’s evidence to support that it works,” Moushey says.
But while a good process can excuse a few bad cases, evidence of a bad process can bring more severe punishment, a particularly serious threat given the Justice Department’s recent focus on repeat corporate offenders. “Companies can’t bury their head in the sand if an issue comes up,” says Moushey. “You can be held to account if you’re consciously disregarding red flags that are popping up in your organization.”
It’s hard to say where Microsoft falls on this spectrum. The company has blocked payments and terminated employees in many of the cases cited by Elabd, and when they haven’t, it’s often because investigations failed to turn up evidence of wrongdoing. But for Elabd, the risk of losing a sales job isn’t enough to fight the broader culture of corruption.
“They never took any legal action against these employees, even while they know they are stealing the company’s money and the governments’ money,” he says. “The hidden message to employees is ‘do whatever you want, make as much money as you can, and the worst that can happen is you’ll get fired.’”
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March 25, 2022 Published by The Verge.
