Microsoft Subsidiary Reported to the Norwegian Police

Accounting irregularities in Fast Search and Transfer, which was acquired by Microsoft in January and is now a subsidiary, have been reported to the Norwegian police by the Kredittilsynet, the financial supervisory authority of Norway.

"We think this is a serious matter. It is very important that listed companies provide correct information," said Nina Servold Oppi, special advisor at Kredittilsynet.

Reporting a company to the police is a first for her section of Kredittilsynet, which monitors accounting practices, according to Oppi. Kredittilsynet does not want to comment on what they think the police will do.

It sent its report to the police department in Oslo last week, but so far it hasn't been received, according to Torgny Isene, detective chief inspector at the Oslo police department. So what happens next is still uncertain.

Kredittilsynet first reported Fast Search and Transfer to Økokrim, which investigates and prosecutes economic crime. Økokrim agreed the transgressions are serious, but lacked the manpower to investigate.

The problem goes back to 2006, when the company counted a memorandum of understanding as revenue, before the deal was signed. But there are other problems as well, according to Oppi, who declined to elaborate on the details.

Microsoft, which paid US$1.2 billion for Fast Search and Transfer, said it is aware of the review, but remains confident in its decision to acquire the company.

It has also taken several steps to align accounting practices with Microsoft's own standards for financial reporting and controls, according to a spokesman.

Fast Search and Transfer caught the attention of Kredittilsynet in May 2007 after a copy of a presentation related to first-quarter 2007 results became publicly available by mistake for a short time. In July 2007 it sent a letter to the company asking for information about its bookkeeping, and the continued its inquiry.

As a result of the Kredittillsynet inquiry and an internal investigation, Fast Search and Transfer restated its earnings on May 2, turning a NOK15 million ($3 million) profit into a NOK200 million loss.

Fast Search and Transfer declined to comment on the matter.