Two former Microsoft Corp. managers have filed a civil lawsuit against the Redmond-based company, alleging that the company retaliated against them after they reported suspicious corporate expenses by another employee.
The suit was filed on Feb. 25 by Ted Stockwell and Eric Engstrom, who were terminated from Microsoft in December 2013 and January 2014, respectively. The two had been with the company off and on since the late 1980s and 1990s, respectively.
According to court documents obtained by the Redmond Reporter, the suspicious expenses were from an employee referred to as “John Doe” in the documents. Some of the reports Doe turned in “were in excess of $7,000.” Stockwell also noted some expenses were just vaguely described as “entertainment expenses,” which Doe told Stockwell told were for “hostess bars” in South Korea, according to court documents. Upon learning this, the documents state, Stockwell asked Doe if he was “expensing prostitution services of hostesses.” Doe denied this.
Doe came to work for Stockwell and Engstrom’s team, who were developing a strategic initiative known as Bing as a Platform (BaaP), in fall of 2010, the documents state. Doe had been working in Microsoft’s Search Technology Center Asia prior to this and was on loan to Stockwell and Engstrom to assist them in pitching a pilot project to a corporate partner, according to the court papers.
At the time, Stockwell was in charge of approving Doe’s expenses and it was at the end of February or beginning of March 2011 that the former became concerned about the on-loan employee’s reports, according to court documents.
“Stockwell soon realized that the expense reports Doe had filed were an entire order of magnitude greater than Stockwell had initially understood,” the documents state.
Stockwell shared his concerns with Engstrom, his manager, about the size of the expenses he had approved for Doe and told Engstrom that he believed Doe was expensing hostess bars and potentially prostitution.
“Stockwell and Engstrom were both aware that in Korea and other parts of Asia, ‘hostess bars’ often provide sexual services to their customers,” court documents state.
Engstrom reported to their concerns his boss, Corporate Vice President Erik Jorgensen, who referred them to human resources manager Jeff Williams.
On March 22, 2011, Stockwell provided Williams with a spreadsheet showing “more than $22,000 in ‘entertainment expenses’ that Doe incurred while assigned to work on Stockwell’s team in Korea,” according to court documents.
Microsoft began an investigation into Doe’s expense reports and Engstrom and Stockwell asked not to have to approve any more expense reports from Doe while the investigation was underway.
In or around June 2011, Stockwell gave Doe an employee-performance rating reflecting the expense issue as well as other performance issues, the documents state. The court papers continue, stating that the company raised Doe’s rating without Stockwell or Engstrom’s involvement, “which is a significant departure from company practice.” In addition, the BaaP project was taken away from Engstrom and Stockwell and “their success in developing the BaaP initiative went unacknowledged,” documents state.
Following this incident, court documents state that the two former managers and their teams had received poor performance ratings — some were adjusted after they voiced their concerns, and some were not. These poor ratings — sometimes the worst possible a Microsoft employee could receive — were in spite of Stockwell’s and Engstrom’s significant contributions to major company projects as well as a leadership award Engstrom received in October 2013, documents state. The pair were also threatened with demotions — some of which were implemented — and given significantly smaller teams to work with on projects. In addition, one of their major international projects, the “Brazil” initiative — which included the “creation of a commercial (application) and partnering with large consumer brands in an effort to compete with Amazon — was scrapped, even though Stockwell had been able to line up a number of potential partners, according to the documents.
Following Stockwell’s and Engstrom’s terminations, the Brazil project was restarted under a different name.
In a prepared statement, Microsoft responded to Stockwell’s and Engstrom’s claims, stating, “We’ve carefully reviewed this case and found nothing to substantiate the speculation in the complaint or the allegation of retaliation, and we’re confident a court will agree with us. We always encourage employees to raise concerns that they may have, and take such reports seriously.”
Through the lawsuit, Stockwell and Engstrom are seeking damages for back pay, front pay, lost benefits, emotional distress, loss of enjoyment of life, humiliation, personal indignity, embarrassment, fear, anxiety, and/or anguish. The amount would be determined at trial, according to court documents.
