€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.