Microsoft targeted in apparent Chinese anti-trust probe

 Microsoft Corp appears to be the latest U.S. company targeted by China for anti-trust investigation after government officials paid sudden visits to the software firm's Chinese offices on Monday.

Representatives from China's State Administration for Industry & Commerce (SAIC) made the visits to Microsoft offices in Beijing, Shanghai, Guangzhou and Chengdu, according to local media reports that were confirmed by Microsoft.

The Chinese government agency, which is in charge of market supervision and regulation and usually takes the lead in bribery and corruption investigations as well as intellectual property rights abuse cases, declined to comment on the visits.

A Microsoft spokeswoman said the company was "happy to answer the government's questions", but declined to give any further information.

A source close to the company said the visits were most likely the preliminary stage of an anti-trust investigation.

If that is the case, Microsoft would be one of the biggest U.S. companies to fall under the eye of Chinese regulators as they ramp up their oversight in an apparent attempt to protect local companies and customers.

Qualcomm Inc, the world's biggest cellphone chip maker, is facing penalties that may exceed $1 billion in one such Chinese anti-trust probe, following accusations of overcharging and abusing its market position.

China has other anti-trust regulators. The National Development and Reform Commission is mainly responsible for anti-trust violations related to pricing, while the Ministry of Commerce vets mergers and acquisitions.

Last year, officials from SAIC visited large international drug manufacturers in China including AstraZeneca Plc and Sanofi SA, as part of a broad investigation into the sector. SAIC officials also visited the Hangzhou office of Roche Holding AG earlier this year.

Beijing's increasing use of its 6-year-old anti-monopoly law and price competition rules to weigh-in on global mergers has riled U.S. companies and strained U.S.-China business relations.

The U.S. Chamber of Commerce earlier this year urged Washington to get tough with Beijing on its use of anti-competition rules, noting that "concerns among U.S. companies are intensifying".

U.S.-China business relations have been severely strained recently by wrangles over data privacy. State media have called for "severe punishment" against tech firms for helping the U.S government to steal secrets and monitor China, in the wake of revelations by former U.S. National Security Agency contractor Edward Snowden..

Tensions increased in May when the U.S. Justice Department charged five members of the Chinese military with hacking the systems of U.S. companies to steal trade secrets.

The latest move by China's authorities caps a rocky period for Microsoft in the country. Earlier this month, activists said Microsoft's OneDrive cloud storage service was being disrupted in China.

In May, central government offices were banned from installing Windows 8, Microsoft's latest operating system, on new computers. This ban appears to not have been lifted, as multiple procurement notices since then have not allowed Windows 8.

Nevertheless, the company has pushed forward with plans to release its Xbox One gaming console in China in September, forming distribution ties with wireless carrier China Telecom Corp and e-commerce company JD.com Inc.

Microsoft shares fell 1.2 percent on Monday, underperforming a 0.1 percent decline for the Nasdaq Composite index.

Gifts-for-favors trial set for ex-governor, wife

Former Virginia Gov. Bob McDonnell, his reputation already tarnished and his political future destroyed by a gifts-for-favors scandal, faces the possibility of an even greater loss when his trial on federal corruption charges begins Monday.

The onetime rising Republican star and his wife, Maureen, could be sentenced to decades in prison if convicted of the charges in a 14-count indictment issued by a grand jury 10 days after McDonnell left office in January. They are accused of accepting more than $165,000 in gifts and loans from Jonnie Williams, the founder of a dietary supplements company, in exchange for helping to promote his products.

Legal experts have said the case is no slam-dunk for the prosecution, however, and exceptionally strident language in court filings point to a no-holds-barred battle that will pit the motives and credibility of the former first couple against Williams, who will testify for the prosecution under immunity. Defense attorneys have suggested the case is politically motivated and argued that prosecutors have stretched the meaning of federal bribery laws to cover routine and long-accepted political courtesies.

"The defense team for the governor appears to have been very active and aggressive, and that's what you have to do to meet the challenges in these kinds of cases," said Andrew Sacks, a defense attorney who represented a former Virginia lawmaker convicted of bribery and extortion in 2011.

After Sacks' client, former Del. Phillip Hamilton, was sentenced to more than 9 years in federal prison, McDonnell said: "Today's judgment is a reminder that no one is above the law."

That's a theme the prosecution is likely to lay out for the jury during a trial before U.S. District Judge James R. Spencer. It is scheduled to last at least five weeks.

Barry J. Pollack, a criminal defense attorney who is not involved in the McDonnell case, said one of the key questions for the jury will be whether McDonnell believed it was criminal to accept the gifts — including a Rolex watch, designer clothing, golf trips and $15,000 for a daughter's wedding expenses — while supporting Williams' efforts to grow a Virginia business.

"The mere fact that he accepted gifts doesn't mean he accepted them with corrupt intent, and that's what the case is going to come down to — whether the jury believes the governor was acting with corrupt intent," Pollack said.

The defendants have hired a small army of attorneys, led by former federal prosecutor John Brownlee for McDonnell and ex-White House lawyer William Burck for his wife. A group of McDonnell supporters that established a legal defense fund has estimated the case will cost the McDonnells at least $1 million. It's a daunting figure for a couple who raised five children primarily on his salaries as a hospital supply company employee, assistant prosecutor, state lawmaker and attorney general before becoming governor. The defense fund has raised about $250,000.

On the other side, with the vast resources of the federal government at its disposal, is a team of veteran prosecutors led by Assistant U.S. Attorney Michael Dry.

Pollack said the government tends to carefully choose which cases it tries, but some defendants are acquitted, even in high profile cases.

He said prosecutors likely will counter defense claims of a lack of criminal intent by portraying the McDonnells as dishonest.

"The government necessarily will call Gov. McDonnell's character into question," Pollack said.

Prosecutors also will portray the couple as financially desperate. McDonnell, who was widely considered a possible Mitt Romney running mate in 2012, has hired an accountant as an expert witness to testify that his finances were sound.

Defense attorneys have signaled in court papers that part of their strategy will be to put Williams' character on trial. They have said the case boils down to "a credibility contest" between a former governor with a distinguished career in public service and a businessman whose companies have been investigated by regulators and sued by shareholders, and who is now getting a sweetheart deal for cooperating with prosecutors.

The jury also will have to weigh the two sides' competing interpretations of federal bribery laws. McDonnell claims his dealings with Williams did not involve any "quid pro quo" — the Latin term used in the law that means one thing for another. McDonnell argues that while he arranged meetings with government officials for Williams and hosted an event at the Executive Mansion to launch Star Scientific's signature product, such accommodations fall short of sort of benefits historically associated with bribery — government grants and jobs, for example.

Prosecutors counter that an exchange of benefits need not be so specific to be illegal. The McDonnells' willingness to help Williams on "an as-needed basis" and Williams' expectation of something in return, whether he received anything or not, qualifies as a quid pro quo, they say.

To some extent, the trial could pit the couple against each other. Bob McDonnell's attorneys have said in court papers that most of the allegedly shady dealings cited in the indictment were by Maureen McDonnell, including a New York City shopping spree, a $50,000 loan and the $6,500 Rolex as her gift to the governor — all bankrolled by Williams.

Spencer rejected the couple's request to be tried separately, which the former governor says deprives him of testimony his wife otherwise would have offered in his behalf. Maureen McDonnell said in court filings that she would not testify if she and her husband were tried jointly. It's not clear if the former governor will take the stand.

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Key dates in ex-Virginia governor corruption case

A look at some of the key events in the corruption case against former Virginia Gov. Bob McDonnell and his wife, Maureen. McDonnell served as governor from January 2010 to January 2014.

— March 2009: McDonnell begins using a jet owned by Jonnie Williams, the CEO of dietary supplements maker Star Scientific Inc., in his campaign for governor, according to prosecutors.

— March 8, 2012: Virginia Executive Mansion chef Todd Schneider tells authorities investigating allegations that he stole from the mansion's kitchen that he has information about wrongdoing by the McDonnells. Schneider's catering services for a McDonnell daughter's wedding had been financed by a $15,000 check from Williams, according to prosecutors.

— Feb. 15, 2013: Authorities interview Maureen McDonnell about $50,000 and $15,000 checks from Williams. She had asked for a $50,000 loan because of financial difficulties, prosecutors say.

— June 10, 2013: A state legislator says he was subpoenaed to testify before a grand jury investigating the McDonnells' relationship with Williams.

— July 16, 2013: A Republican strategist hired by McDonnell to help assemble a legal defense team confirms that the governor has hired former U.S. Attorney John Brownlee.

— July 19, 2013: McDonnell supporters announce the creation of a nonprofit corporation to accept donations for his legal defense.

— July 23, 2013: McDonnell says he has repaid two loans from Williams totaling more than $120,000, apologizes for embarrassing Virginians but insists he has broken no laws.

— July 30, 2013: McDonnell says he is returning several gifts from Williams, including a $6,500 Rolex watch that Maureen McDonnell allegedly requested as her Christmas present to the governor.

— Sept. 18, 2013: Schneider pleads no contest to misdemeanor embezzlement charges.

— Jan. 11, 2014: McDonnell ends his four-year term under the cloud of the ongoing federal investigation.

— Jan. 21: A federal grand jury indicts the McDonnells on 14 charges, accusing them of accepting thousands of dollars in gifts and loans from Williams in exchange for promoting his company's products. McDonnell denies wrongdoing and denounces what he calls "unjust overreach" by federal prosecutors.

— Jan. 24: The McDonnells plead not guilty to all charges and are allowed to remain free until their trial, scheduled to begin Monday.

The Pentagon can't track weapons it sends to Afghanistan.

Lost in Afghanistan: US can't track weapons it sends.

The Pentagon has shipped Afghan security forces tens of thousands of excessive AK-47 assault rifles and other weapons since 2004 and many have gone missing, raising concerns that they've fallen into the hands of Taliban or other insurgents.


John F. Sipko, the U.S. special inspector general for Afghanistan reconstruction, found in a report released Monday that shoddy record-keeping by the Defense Department, the Afghan National Army and the Afghan National Police has contributed to the failure to track the small arms.

The Pentagon is still sending Afghanistan weapons based on its peak 2012 levels of army and police personnel, even as those numbers have declined, Sipko found.

"The scheduled reduction in Afghan National Security Force personnel to 228,500 by 2017 is likely to result in an even greater number of excess weapons," the report said. "Yet DOD continues to provide ANSF with weapons based on the (2012) ANSF force strength of 352,000 and has no plans to stop providing weapons to ANSF."

Congress has made the Pentagon responsible for tracking all U.S. small weapons and auxiliary equipment sent to Afghanistan, which have totaled 747,000 rifles, pistols, machine guns, grenade launchers and shotguns worth $626 million since 2004.

"However, controls over the accountability of small arms provided to the Afghanistan National Security Forces are insufficient both before and after the weapons are transferred," Sipko concluded in the report.

The Pentagon said in response to the audit that it has no authority to compel the Afghan government to perform a complete small-weapons inventory as Sipko recommended, and that the Afghanistan government, not the United States, is responsible for determining whether there are excessive weapons.

"The DOD does not have the authority to recover or destroy Afghan weapons," Michael J. Dumont, deputy assistant secretary of defense for Afghanistan, Pakistan and Central Asia, wrote to Sipko in response to his findings.

Thomas Gouttierre, director of the Center for Afghanistan Studies at the University of Nebraska in Omaha, said he wasn't surprised by Sipko's findings of loose weapons in the war-torn nation. A former strategic adviser to U.S. commanders in Afghanistan, he has visited there more than a dozen times since the U.S. invasion in October 2001 after the Sept. 11 attacks.

Gouttierre said the issue of missing weapons is part of a larger problem in which billions of dollars in U.S. aid to Afghanistan has been siphoned off by waste, corruption and mismanagement.

"It's very evident to me that our government has been looking the other way for a long time," Gouttierre said. "Everything after 2003 was Iraq-focused. In Afghanistan, we kind of threw money at programs without any real supervision that would be required of something this massive."

The current U.S. drawdown from Afghanistan will see most American troops gone this year, with the last combat brigades scheduled to leave by the end of 2016. Inspectors working for Sipko found missing weapons during visits between May 2013 and June 2014 to four central weapons depots in Afghanistan belonging to the army or the police.

During a visit to the central supply depot of the Afghan National Army, which is "managed by Afghans with the assistance of U.S. advisers," the depot's records showed it as possessing 939 M-16 rifles, but the inspectors could find only 199.

The Pentagon has supplied 83,184 more AK-47s to Afghan security forces than they have said are needed, the U.S. inspectors found.

"Without confidence in the Afghan government's ability to account for or properly dispose of these weapons, SIGAR is concerned that they could be obtained by insurgents and pose additional risks to Afghan civilians and the Afghan National Security Forces," the report said.

A primary cause of the overall problem is that the Defense Department uses one information system to record weapons sent from the United States but employs a separate digital system to track weapons as they arrive in Afghanistan.

The two systems are riddled with inconsistencies and redundancies, the audit found.

To make matters worse, the Afghan National Army uses yet another tracking system, which relies on automated inventory management, and the Afghan National Police has no standard accounting system.

"The Afghan National Police uses a combination of hard-copy documents, handwritten records and some Microsoft Excel spreadsheets to maintain inventory records," Sipko's report said.