Siemens' Bribery Flourished Despite Warnings

By Pat Reber
13:33, December 16th 2008
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   Washington - A culture of bribery and impunity flourished at German corporate giant Siemens AG over the past decade despite repeated warnings from outside and inside the firm, according to US court documents.

   The details were released Monday as Siemens pleaded guilty in US District Court in Washington to a massive global corruption scandal that won it contracts from Latin America to Asia to the Middle East.

   Bribes were routinely paid through suitcases stuffed with cash, from cash desks where Siemens employees could fetch up to 1 million dollars at a time, and through secret bank accounts and slush funds, US justice officials charged.

   The company agreed to pay fines of 1.33 billion dollars: 800 million dollars in criminal and civil charges in the US, and another 530 million dollars in Germany, to keep parallel cases out of court.

   US officials said it was the largest fine ever levied on a foreign firm.

   Siemens was also fined 287 million dollars in 2007 by the Munich public prosecutor's office in a settlement over foreign corruption.

   No charges have been filed against individuals in the US, but US officials did not rule out the possibility. Criminal trials in Germany are ongoing against former Siemens executives.

   From the mid-1990s until last year, Siemens' units paid kickbacks and bribes to win contracts from Iraq's government in the United Nations oil-for-food program, from Venezuelan officials for commuter rail projects, from the Bangladesh government for a mobile phone network, and from Argentine officials for a 1-billion-dollar identity card project, US officials charged.

   All told, the company paid at least 1.36 billion dollars in bribes and unaccounted funds from 2001-07, a period during which the US claims legal jurisdiction since Siemens was listed on the US stock exchange.

   Another 1.3 billion dollars was estimated to have been given out during the 1990s, according to the documents.

   "Bribery was nothing less than standard operating procedure at Siemens," US Acting Assistant Attorney General Matthew Friedrich said at a press conference.

   US prosecutors charged that Siemens' top management systematically ignored a 1999 German law that put into practice international agreements banning bribery and corruption in foreign dealings.

   Executives also received warnings from within the firm, from auditors and from US lawyers about the "potential criminal and civil implications" of its off-the-books accounts as Siemens prepared for listing on the New York Stock Exchange in 2001, prosecutors charged.

   After 2000, investigations into Siemens' bank accounts were launched in Austria, Liechtenstein and Switzerland. Government investigations into corruption were launched in Italy, Israel, Hungary, Azerbaijan, Taiwan and China, the US documents showed.

   "Nevertheless, Siemens (board) members and other senior management failed to adequately investigate or follow up on any of these issues," the documents said. The firm also failed to take "effective disciplinary measures."

   Large sums of money continued to be paid to "business consultants" who passed bribes to foreign government officials. The money flow was covered up with "false invoices" and accounting tricks. In some cases, Post-it notes were used for executive signatures authorizing payments "to conceal the identity of the signers and obscure the audit trail," US prosecutors charged.

   "Siemens' pattern of bribery was unprecedented in scale and geographic reach," said Linda Chatman Thomsen, director of enforcement at the Securities and Exchange Commission (SEC), which regulates business practices in listed companies.

   The US has boosted resources for fighting foreign corruption in the past years, justice officials said. The Siemens case was part of a campaign to level the playing field so all companies "have access to global markets," Friedrich said.

   "The people who get hurt are often residents of the poorest countries in the world," he said. "On days like today one can see the promise of what is possible if we work as a global community against corruption."

   Three Siemens subsidiaries in Argentina, Bangladesh and Venezuela each also agreed to pay 500,000-dollar fines as part of the deal.

   Charges were brought under the US Foreign Corrupt Practices Act and the rules of the SEC which require transparency and internal controls for listed businesses.

   Friedrich recognized Siemens' cooperation as "exceptional" and said the company had "implemented real reform" with a reputable compliance monitor, former German finance minister Theo Waigel.

   Siemens was forced to fire most of its management team after the scandal broke in 2006.

   "We regret what happened in the past. But we have learned from it and taken appropriate measures. Siemens is now a stronger company," said Peter Loescher, Siemens chief executive.

   Analysts in Germany said the overall penalty was much less than the 160-year-old company had feared. US prosecutors calculated that the fine could have reached up to 2.7 billion dollars.



© 2007 - 2009 - DPA/eFluxMedia
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