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He’s Got The FCPA Blues

Reuters’ Matt Daily said it best:

A year ago, Alcoa Inc brought Siemens Chief Executive Klaus Kleinfeld across the Atlantic to take the helm of the U.S. aluminum giant.

This week, his baggage arrived.

Daily’s story is about Siemens’ decision to sue 11 former executives, including ex-ceo Kleinfeld. The company wants damages because of alleged corrupt payments Siemens made around the world while the 11 were in charge.

Kleinfeld, 50, a native of Germany, became Alcoa’s president and chief executive officer in May this year. He’d served as its president and chief operating officer since October 2007. Before joining Alcoa, he was president and chief executive officer of Siemens from January 2005 to June 2007.

To recap: In early October 2007, Siemens settled global corruption charges with Munich prosecutors. The German industrial and engineering giant paid a fine of €201 million and at the time admitted to questionable payments around the globe of approximately €420 million. But the settlement didn’t resolve the Foreign Corrupt Practices Act investigation by U.S. authorities, and Siemens later disclosed that its internal review identified questionable payments of up to €1.3 billion. The company also faces possible charges of public corruption in Italy, China, Hungary, Indonesia and Norway. Last week Siemens’ former telecoms sales manager, Reinhard Siekaczek, was fined $170,000 by a German court and hit with a two-year suspended prison sentence for his part in the corruption.

When Siemens finally reaches a deal with U.S. prosecutors, it is likely to pay the highest penalties ever for FCPA offenses. The current record of $44.1 million is held by Baker Hughes.

Alcoa, coincidentally, has Foreign Corrupt Practices Act concerns of its own. In February this year, it was sued by Aluminum Bahrain BSC (“Alba”) for corruption and fraud in a Pittsburgh federal court. Alba — majority owned by the government of Bahrain — alleged that it paid $2 billion in overcharges under supply contracts over a 15-year period. Alba says the money went to overseas accounts controlled by Alcoa’s agent, and some was then used to bribe Alba’s executives in return for more supply contracts. Among the Bahraini officials alleged to be involved is Alba’s former chairman, who also served as the country’s powerful minister of petroleum.

The U.S. government appeared in the same federal court in Pittsburgh three weeks later. It asked the court to stay Alba’s civil suit pending a criminal investigation into whether Alcoa and its executives and agents violated the FCPA and mail and wire fraud statutes. Alcoa said it’s innocent and will cooperate with the feds.

The Reuters story says Alcoa reviewed investigations commissioned by Siemens and found that Kleinfeld “had handled the matter well. . . . German prosecutors have denied reports they planned to question Kleinfeld on the bribery scandal, but the issue puts a cloud over him as [Alcoa] navigates the global metals and mining market that is a swirl with mergers and acquisitions.”


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