Siemens AG — the German industrial giant enmeshed in a global corruption scandal — said this week that for fiscal 2007 it will delay ratifying acts of individuals who have served on its managing board at any time since 1999. President and CEO Peter Löscher, who joined Siemens after the events under investigation occurred, and who’s leading the effort to clean up the company, is exempt from the ratification’s postponement.
The move may preserve Siemens’ ability to act against managers who knowingly participated in the fraud, which allegedly involves illegal payments amounting to €1.3 billion. In the United States, the Securities and Exchange Commission and the Department of Justice are investigating whether Siemens violated the Foreign Corrupt Practices Act. The company is also facing possible charges of public corruption in Italy, China, Hungary, Indonesia and Norway. Before settling any eventual charges against Siemens, U.S. prosecutors will want assurances that the company has taken proportionate corrective action, including identifying those responsible for the illegal payments and imposing on them some level of work-place discipline.
In September 2007, there were reports that Siemens’ internal investigation was stalling, hampered by the stonewalling of its managers in various countries. A dead-end internal investigation would have jeopardized Siemens’ ability to work out a deal with U.S. prosecutors. The company then announced an internal amnesty for most employees. Last month, President and CEO Löscher said: “We have implemented an internal amnesty program that runs until the end of January. In addition, any employee can anonymously report confidential information. This could raise new suspicions that haven’t even been part of the discussion until now. I want a comprehensive inquiry and the complete truth.”
It appears the amnesty has worked as intended. Siemens’ counsel, Debevoise & Plimpton, says the investigation is on track. In a January 16, 2008 letter to the chairman of Siemens’ supervisory board’s compliance committee, Debevoise said this:
“Since November 28, 2007, we have obtained significant new information and developed very substantial leads from participants in Siemens’ amnesty program, as well as other sources, regarding topics relevant to our investigation. In particular, certain of this new information pertains to the conduct and knowledge of a number of individuals who have served on the Managing Board during the past several years. We do not consider it necessary or appropriate to identify these individuals at this time for several reasons. First, significant new information continues to be developed on virtually a daily basis and disclosure could impede the flow of information to us. Second, the investigation is ongoing and we are following up on the new information recently received. Third, in order to protect the reputations of individuals (and not to expose Siemens to any claims from such individuals), we do not believe it appropriate to identify anyone prior to conclusions being reached by us and the Compliance Committee. And fourth, information developed in the investigation may be relevant for governmental or judicial proceedings relating to these or other individuals or to Siemens, and for this reason, consistent with Siemens’ commitment to cooperate with public officials, should not be made public at this time.”
These latest revelations raise expectations that Siemens’ internal report — when it’s finally produced — will be comprehensive enough to help the company clean up its internal mess and reach a final resolution with prosecutors in the U.S. and elsewhere.
View Siemens’ January 16, 2008 News Release Here.
View Debevoise & Plimpton’s January 16, 2008 Letter Here.
View Prior Posts About Siemens Here.