You may recall the huge Romanian corruption scandal that involved large bribes paid to members of the Romanian government in exchange for their approving increases in license fees for Microsoft products. It was in October 2014 that the investigation by the National Anticorruption Directorate began, and soon enough more than 100 persons were identified as being connected to the case. Among them were nine government ministers. Sentencing took place in March and October 2016. Four of the accused are already serving sentences of between two and six years.
There is a good possibility that similar corruption occurred in Hungary, this time involving Microsoft Hungary, a subsidiary of Microsoft Corporation. But the government response couldn’t have been more different.
József Spirk, earlier of Népszabadság and now at 24.hu, broke the news that the parent company had decided to initiate an internal investigation of the business practices of the Hungarian affiliate. In fact, it is likely that the investigation has been going on for some time. Apparently Microsoft headquarters sent a team of investigators to Budapest, perhaps as early as the second half of 2015. The investigators, with the help of a Hungarian law firm, looked into the business practices of Microsoft Hungary, especially during the tenure of István Papp as general manager.
According to Microsoft News, during Papp’s tenure (2011-2015) Microsoft Hungary was recognized as the best-performing Microsoft subsidiary of its size for two years running. In recognition of his achievement, Papp was promoted to the post of vice-president for sales, marketing, and services in the Asia Pacific in August 2015, and he and his family moved to Singapore. But his stay there was short. By March 2016 his employment was most likely terminated. He returned to Hungary, where he became vice president for business development of HIPA (Hungarian Investment Promotion Agency). HIPA is a government organization under the ministry of foreign affairs and trade. It provides professional consulting services to interested companies free of charge, identifying investment possibilities. In brief, he became a civil servant of sorts. After eight months, in August of this year, he decided to establish his own company, called Thriveo. It advertises itself, in its own English, as “No bullshit here. We build or enhance your strategy and engage in execution. We do not apologize for any inconvenience.” Looking at Thriveo’s website, I have my doubts about the future of Papp’s company.
The other person of interest in this story is Viktor Sagyibó, who spent eight years at Microsoft Hungary between 2008 and January 2016. He started fairly low on the totem pole, but by 2012 he oversaw all sales of Microsoft products to the government. In July 2015 he was promoted again, to supervise the company’s business with large corporations. By April 2016, however, he was no longer at Microsoft. His departure was certainly not advertised. Microsoft simply announced a few months after his departure that his job had been taken over by Gabriella Bábel, who began her career at Microsoft in 2011.
After leaving Microsoft, perhaps under a cloud, Sagyibó became CEO of 4iG Nyrt., a company that designs customized software based on Oracle and Java technology. Its customers are mostly government agencies, like the National Health Insurance Fund, the National Police Headquarters, and the Hungarian Central Statistical Office. His tenure at 4iG, however, was short. Two weeks after getting the job, he resigned “for unforeseeable personal reasons.” Apparently his quick departure from 4iG had something to do with Microsoft’s strong suspicion or perhaps even knowledge that Sagyibó had a role to play in the corruption case Microsoft Corporation was investigating.
Microsoft Hungary doesn’t deal directly with the Hungarian government but uses so-called LAR partners. LAR stands for “large account reseller.” As a result of its investigation, last month Microsoft broke its contracts with three of its largest LAR partners “for ethical reasons.” These companies, as you can well imagine, were on very good terms with the Fidesz government.
The largest company, which was perhaps the busiest business partner of Microsoft, was Humansoft Kft., a company established in 1989. It has business arrangements with Dell, Cisco, Symantec, Fujitsu-Siemens, and many other important companies in addition to Microsoft. Humansoft has a close relationship to important Fidesz figures, and as a result it was the beneficiary of a 1.5 billion forint grant for software development from the European Union in 2015. The second company, Euro One Zrt., is also a well-established firm with 100 employees, while the third one is a much smaller outfit called RacioNet Zrt.
Microsoft’s decision to disrupt the traditional method of doing business with the Hungarian government, going back years, was unexpected and very sudden. It came a few days after János Lázár, head of the prime minister’s office, announced on November 7 that Viktor Sagyibó, the former Microsoft employee, had been hired as “ministerial commissioner” entrusted with the supervision of all domestic and EU projects. He is also in charge of monitoring information technology development within the so-called Public Administration and Civil Service Development Operative Program, a program that is very large. Hungary will invest over 935 million euros, including €795 million from EU funding, under this rubric
Sagyibó’s government appointment must have been the last straw for Microsoft. 24.hu naturally tried to get more information from Microsoft Hungary. It received no confirmation of the investigation, but the company didn’t deny the rumor.
Interestingly, both István Papp and Viktor Sagyibó ended up, at least temporarily, in government employment. Sagyibó came out especially well. It is not an everyday affair that someone who most likely left Microsoft under a cloud ends up being a commissioner who is supposed to make sure that EU grants are well spent.