Siemens Settles Corruption And Tax Cases With German Prosecutors

Siemens AG said it will pay a €201 million fine in connection with global corruption allegations that will end the investigation by the Munich Office of Public Prosecution. In an October 4, 2007 press release, Siemens said it will also take a charge for taxes of €179 million for questionable payments of approximately €420 million that were improperly deducted.

The engineering and electronics giant based in Germany said its internal investigation into global corrupt practices is ongoing. It said it has already taken remedial measures to avoid sensitive payments and strengthen internal controls. On October 1, 2007, it announced the reorganization of corporate-wide legal and compliance responsibilities.

Siemens can now concentrate on reaching a resolution with U.S. prosecutors of potential U.S. Foreign Corrupt Practices Act violations.

Siemens AG's ADRs trade on the New York Stock Exchange under the symbol SI.

View Siemens' October 4, 2007 Press Release Here and its October 1, 2007 Press Release Here.

Did Siemens Pay More Than $2 Billion In Bribes?

The Wall Street Journal reports on September 27, 2007 that Siemens' bribery problem may involve corrupt payments of about €1.6 billion ($2.3 billion). That's four times the amount Siemens last disclosed, and its internal investigation is not yet complete. As mentioned in an earlier post Here, this will be the biggest international corruption story around when it comes to the surface. That may happen soon. The U.S. Department of Justice and the Securities and Exchange Commission are actively pursuing the case, perhaps in a cooperative effort with German prosecutors and others.

View the Wall Street Journal's Report Here.

Siemens' Global Corruption Problems Will Worsen

Perhaps the biggest, although not yet the loudest, international corruption story involves Siemens AG, the German electronics and electrical engineering giant. Siemens says it has identified "a multitude of payments made in connection with [consulting agreements] for which we have not yet been able either to establish a valid business purpose or to clearly identify the recipient. These payments raise concerns in particular under the Foreign Corrupt Practices Act (FCPA) in the United States, anti-corruption legislation in Germany and similar legislation in other countries." Some reports put the level of potentially corrupt payments at a staggering half a billion dollars.

The press, led by the Wall Street Journal, is also reporting that Siemens' managers in many countries are stonewalling the internal investigation. That, in turn, may have pushed the U.S. Department of Justice and the Securities and Exchange Commission to begin working on a deal with German prosecutors to share information and possibly resources in their respective investigations.

With Siemens' own managers now going silent, the DOJ and SEC face tough challenges collecting evidence abroad and compelling non-residents to appear in American courts, either as witnesses or defendants. Meanwhile, the tension among Siemens' management-level employees must be enormous. If they voluntarily give evidence, they could end up being prosecuted. If they refuse to give evidence, they could end up being fired and still be prosecuted. And unless the internal investigation gets back on track, Siemens itself may lose the opportunity to work out a favorable disposition of the case with U.S. and other prosecutors.

Siemens AG's ADRs trade on the NYSE under the symbol SI.

View A Recent Press Report Here.

View Siemens' Recent SEC Disclosure Here.