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Entries in Germany (102)

Sunday
Nov182007

All Eyes Are On Siemens

The Big Show these days for followers of the U.S. Foreign Corrupt Practices Act is Siemens' global bribery scandal. To wit, the print and online versions of the November 16, 2007 Wall Street Journal carried a brilliantly reported Page One story based on the fact statement compiled by the Munich public prosecutor ("Ruling Details Bribery Across the Globe"). The lead says, "Scandal-scarred Siemens AG paid millions of euros in bribes to cabinet ministers and dozens of other officials in Nigeria, Russia and Libya as it sought to win lucrative contracts for telecommunications equipment, according to a court ruling that depicts a pattern of bribery by one manager. The document, viewed by The Wall Street Journal, offers the most detailed picture to date of the scandal that has ensnared one of the world's biggest conglomerates in investigations across the globe." The online story is here but is by subscription only.

Business Week's November 15, 2007 online edition questions Siemens' prospects for a quick resolution with the U.S. Department of Justice and the Securities and Exchange Commission. Siemens might be in a hurry to put alleged FCPA violations behind it, the story says, "[b]ut U.S. enforcers may be tough to placate. The bribery scandal comes in the midst of a drive by Washington to hold foreign companies to the same standards as their U.S. competitors. 'Global corruption undercuts democracy and the rule of law; it destabilizes markets; and, it creates an uneven playing field for those companies who are committed to playing by the rules,' U.S. Assistant Attorney General Alice S. Fisher told an audience of anti-corruption specialists in Alexandria (Va.) on Nov. 13, according to her prepared remarks." The story can be found here.

Lots more will be said and written about Siemens' corruption saga in the coming weeks and months.

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

View Prior Posts About Siemens Here.

Thursday
Nov082007

Siemens Discloses More Details About Corruption Investigations

€1.3 Billion In Questionable Payments Have Been Found; Investigations Involve Multiple Divisions and Countries; Oil-For-Food Program Is Also Involved

Siemens AG's November 8, 2007 earnings release for Fiscal Year 2007 and a separate document called "Legal Proceedings" disclosed the most comprehensive information yet about corruption prosecutions and ongoing investigations involving the German industrial conglomerate. Among the items disclosed are these:

Global Corruption Investigation. Questionable payments of €449 million had been identified previously. Further investigation has revealed an additional €857 million in questionable payments -- relating to various countries and business units under review.

Germany. The Munich district court in October 2007 fined Siemens €201 million, ending the investigation by the Munich Office of Public Prosecution. The court found that a former manager bribed officials in Russia, Nigeria and Libya in 77 cases from 2001 to 2004 for the purpose of obtaining contracts on behalf of Siemens.

-- The Munich public prosecutor is still investigating certain current and former employees on suspicion of embezzlement, bribery and tax evasion. The prosecutor has searched Siemens' premises and employees' private homes. Arrest warrants have been issued for several current and former employees, including former members of senior management.

-- Prosecutors in Darmstadt charged two other former employees. In May 2007, the Regional Court of Darmstadt sentenced one of them to two years in prison (suspended on probation) for commercial bribery and embezzlement. Another former employee was sentenced to nine months in prison (also suspended on probation) for aiding and abetting commercial bribery. Siemens AG was ordered to disgorge €38 million of profits.

-- In 2004, the public prosecutor in Wuppertal began investigating certain Siemens employees who allegedly participated in bribery related to the award of an EU contract for refurbishment of a power plant in Serbia in 2002. In August 2007, the public prosecutor searched the premises of Siemens' Power Generation Group in Erlangen, Offenbach and Karlsruhe (all in Germany).

Italy. The public prosecutor in Milan is investigating allegations that two employees of Siemens S.p.A. made illegal payments to employees of the state-owned gas and power group ENI. Also in Italy, legal proceedings involving corruption charges against two other former employees ended when they plea bargained in November 2006.

China, Hungary, Indonesia and Norway. Other pending investigations into allegations of public corruption involving Siemens, certain current and former employees, or projects in which Siemens is involved, include the following examples:

-- There are numerous public corruption-related investigations in China relating to several divisions of Siemens Ltd. China, primarily Medical Solutions (Med), Automation and Drives and Siemens IT Solutions and Services. The investigations were begun by prosecutors in Guangdong, Jilin, Xi´an, Wuxi, Shanghai, Ting Hu, Shandong, Hunan, and Guiyang, among others.

-- Siemens Zrt. Hungary and certain employees are being investigated by Hungarian authorities for suspicious payments under consulting agreements with shell corporations, and for alleged bribery related to the award of a contract for delivery of communications equipment to the Hungarian Armed Forces.

-- The public prosecutor in Kalimantan, Indonesia, has charged the head of the Med division of Siemens PT Indonesia with participating in bribery, fraud, and overcharging related to an award of a contract for delivery of medical equipment to a hospital in 2003.

-- The Norwegian government is investigating possible bribery and overcharging of the Norwegian Department of Defense under a contract for the delivery of communications equipment in 2001.

The United States. The U.S. Department of Justice is investigating possible criminal violations by Siemens of the U.S. Foreign Corrupt Practices Act and other laws. During the second quarter of FY 2007, the U.S. Securities and Exchange Commission upgraded its informal inquiry of Siemens into a formal investigation. The SEC and the DOJ are also investigating possible violations of U.S. law by Siemens in connection with the Oil-for-Food Program. Siemens is cooperating with the U.S. investigations.

Other Oil-For-Food Investigations. A French magistrate commenced a preliminary investigation of local companies, including Siemens France S.A.S., in the Oil-for-Food Program. German prosecutors began a related investigation and searched Siemens' premises and employees' private homes in Erlangen and Berlin in August 2007. Siemens is cooperating with the authorities in France and Germany.

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

View Siemens' November 8, 2007 Earnings Release Here.

View Siemens' November 8, 2007 Document "Legal Proceedings" Here.

Saturday
Oct062007

Saved By The Bell In Germany?

Siemens' blitzkrieg settlement of corruption charges with German prosecutors happened without public proceedings and, so far, with very little disclosure. Apart from Siemens' statement that its tax adjustment involved "questionable payments of approximately €420 million," not much is known about the settlement and what it covers. Now, with German enforcement actions against Siemens apparently closed, some may view the moves by the Munich Office of Public Prosecution as opaque and premature.

The U.S. Department of Justice and the Securities and Exchange Commission are unlikely to consider settling Foreign Corrupt Practices Act allegations until they know the full scope of Siemens' potentially illegal conduct. The next challenge for Siemens, then, will be to convince U.S. prosecutors that the company's internal investigation, when it is finished, is accurate and complete. That might be difficult. An earlier report by the Wall Street Journal said some Siemens' managers are not cooperating with the internal investigation, and a second Journal report said Siemens' American law firm thinks the questionable payments might amount to €1.6 billion instead of the €420 million cited in the German settlement.

While U.S. prosecutors ponder their next steps, the abrupt end of the German prosecutions may cause other governments in Europe and elsewhere to wonder if they should demand full public disclosure of Siemens' questionable conduct and perhaps impose sanctions of their own.

Friday
Oct052007

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.

Friday
Sep282007

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.

Monday
Sep032007

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.

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