Microsoft is using illegal bribes in the Middle East and Africa. Why is the SEC turning a blind eye?
After paying fines for violations in Hungary and South Africa, Microsoft agreed to stop the practice—but I have evidence that I believe shows they continue to violate the Foreign Corrupt Practices Act elsewhere.
By Yasser Elabd
I was recruited by Microsoft in 1998, and I helped bring the company’s products throughout the Middle East and Africa for the next 20 years. I was successful and received many promotions. But eventually, I noticed something strange: many employees younger than me, in lower positions, were driving luxury cars and purchasing homes sometimes worth millions of dollars. For my part, I could not afford to buy a home, let alone anything else luxurious, despite my career success. I wondered, naively, whether these colleagues had families with money—but if so, why would they be working on a Microsoft sales team?
I put the thought out of mind as Microsoft’s business in the Middle East and Africa boomed. I established contracts in the public sector in Ghana, Nigeria, Zimbabwe, Qatar, Egypt, Ethiopia, Kenya, and many other countries. I sold licensing and solutions to Saudi Arabia’s Ministry of Health, Ministry of the Interior, and National Guard. The Sub-Saharan Africa team I built generated $1 million in 2002; a year later, our revenue was over $15 million. This is, of course, a tiny amount compared to the $4 billion Microsoft now banks in the region, with its near monopoly.
To accomplish this kind of growth in such a short time, Microsoft has long utilized 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. Together with these partners, Microsoft brings e-health solutions to hospitals and GPS and digitized services (such as online tax payments) to government agencies. The partner then takes a share of Microsoft’s licensing sales revenue, usually 10–15 percent.
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.
In 2016, a request came through in the amount of $40,000 to accelerate closing a deal in one African country. When I looked through the submission, I immediately knew something was wrong. The customer did not appear in Microsoft’s internal database of potential clients. 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.
Still suspicious, I escalated the issue to my manager, and then to 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. 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.
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.
I requested a meeting with his boss, a vice president. When I told her what had happened, she asked whether I had any personal issues with him, and suggested the three of us meet, but the meeting was never scheduled. So, I emailed Microsoft CEO Satya Nadella and an HR executive to explain that I felt mistreated by this manager. 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.”
After this exchange, I began to be left off of important deals. My manager prevented me from attending a trip with a delegation from the Egyptian army, another to Morocco’s Ministry of Justice, and many more. I showed proof of my blocked travel requests to the vice president for the Middle East and Africa, explaining that cutting me out of business trips was negatively affecting our customers, but nothing was done. 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.
Eventually, Microsoft put me on a “performance improvement plan,” even though I was one of the highest performers on the team. When I refused to acknowledge the plan, the company ended my employment in June 2018 and gave me two months’ notice. I was, of course, shocked to be fired, given my achievements and long tenure. 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.
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.
For instance: In three of the seven sampled transactions, discounts worth more than $5.5 million were not passed through to the end customers—in this case, two government-controlled entities. Another audit report showed a deal with the Saudi Ministry of the Interior in which a $13.6 million discount did not pass through. Further audits of deals in Kuwait and Saudi Arabia found a total of $20 million unaccounted for—and this involved only two partners out of hundreds across the region. 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?
The documents from my ex-colleague clarified other situations that had raised red flags for me years before. In a 2015 meeting with members of the Nigerian Parliament, the president of the Senate complained to me that the government had paid $5.5 million for Microsoft licenses for hardware they did not possess. This should never have happened, because Microsoft’s standard practice was to meet with the National Assembly’s IT department and financial controller to check the number of computers needing licenses before submitting any proposal.
Likewise, auditors discovered that Qatar’s Ministry of Education was paying $9.5 million annually over seven years for Microsoft Office and Windows licenses they weren’t using—as they didn’t even have any PCs or laptop computers! Others have called out a similar scheme in Cameroon, where neither the government nor Microsoft would confirm whether 500,000 purchased Office Academy 365 licenses were actually in use.
In Saudi Arabia, when the Ministry of Health uncovered a $1.5 million payment for Skype licenses that were never provided, the ministry’s chief information officer demanded that 10,000 licenses be delivered in 72 hours or he would conduct an audit. Of course, that money had already been distributed among those involved in the scam. Microsoft immediately provided new licenses before the side agreements could be exposed.
Another spreadsheet revealed a “bad debt” write-off for a few Saudi partners of $18.6 million in one quarter alone. Millions of dollars vanished in just three months! The spreadsheet does not show where that money went, but what is notable—and suspicious—is that several Microsoft employees were previously employed by two of the partners the bad debt was attributed to, and the son of one of those partner’s owners was also employed by Microsoft.
Another 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. When the matter was investigated, the sales manager threatened to speak out about the widespread corruption he had seen at the company. I heard that Microsoft paid him to leave quickly and quietly, took no legal action against him, and did not report the forgery.
I am not the only person at Microsoft who has alleged corrupt practices. I know of five others from various departments who were terminated or pushed to resign for raising flags about inconsistencies in finances. For example, a whistleblower filed an anonymous complaint with the Securities and Exchange Commission (SEC) alleging the South African Department of Defense overpaid Microsoft partner EOH Mthombo for software licenses. According to the complaint, the deal—in which middleman EOH received $8.4 million, far more than Microsoft made—was flagged to a Microsoft compliance officer, but no action was taken by the company. The whistleblower contends that this was because EOH was helping Microsoft with a $50 million contract for the South African Police Service.
One might question how much these examples implicate Microsoft itself. Could they be isolated incidents that escaped the company’s notice? Given the flags raised by auditors, employees, and government officials in multiple countries, this seems highly unlikely.
A further incident reveals Microsoft is not an unwitting party here. In 2013, it was discovered internally that a member of the sales team managing one country’s government contracts was taking money from the business investment fund for a “pilot program” at a company in another country—but the company was his own, and the program was fake. HR and legal department executives confronted the employee, who threatened to expose the scale of corruption inside Microsoft; he then resigned and joined a rival company the next day. Later, at an annual meeting in Turkey, the vice president and the HR director for the region publicly stated that no action had been taken against the employee because Microsoft was aware that punishment for this sort of crime in the man’s home country was severe, and had therefore declined to pursue a case.
In my estimation, a minimum of $200 million each year goes to Microsoft employees, partners, and government employees. Experience leads me to believe that 60–70 percent of the company’s salespeople and managers in the Middle East, Africa, and parts of Europe are receiving these payments. Among the customers who I believe have received this money are government officials in Ghana, Nigeria, Zimbabwe, Qatar, and Saudi Arabia.
To anyone who has been following Microsoft closely, this won’t come as a shock. In 2019, the company paid a penalty to the U.S. government of $25.3 million for allowing bribery and kickbacks in Hungary, Saudi Arabia, Thailand, and Turkey. At the time, Microsoft president Brad Smith proclaimed publicly that the “improper payments” were an “unacceptable” practice, and that “there is no room for compromise when it comes to ethical business practices.” One term of the 2019 settlement with the Department of Justice (DOJ) was to terminate a contract with a specific partner. Although Microsoft formally terminated the contract, it is still working with this partner through a third-party company—and still engaging in bribery and kickbacks in other countries.
What is a shock: This time around, 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.
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. 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.
I expected better of a United States company. As I alleged in my complaint to the SEC, Microsoft is violating the Foreign Corrupt Practices Act, and continues to do so brazenly. And why wouldn’t they? By declining to investigate these allegations and the evidence I’ve given them, the SEC and DOJ have given Microsoft the green light.
As of the time of publication, Microsoft and the SEC did not respond to our requests for comment.