By Evan Koblentz
Tuesday, December 16, 2008
Siemens AG is paying $1.6 billion in fines stemming from charges of frequently bribing government officials to obtain contracts, the U.S. Securities and Exchange Commission disclosed today.
Employees at all levels and throughout Siemens’ myriad businesses routinely offered bribes to companies around the world, resulting in Siemens earning more than $1.1 billion in profits on these and several other transactions, the agency said.
Siemens will pay $800 million in fines to the U.S. government and approximately $569 million to the German government, in addition to about $285 million already paid, officials said.
Most of the bribes applied to industrial products; however, the mobile industry was also affected. Siemens gave about $5.3 million for a contract with the Bangladesh Telegraph and Telephone Board and around $140,000 to the Vietnamese Ministry of Defense for a GSM network there.
Last year, Siemens merged its networking business with Nokia’s to create Nokia Siemens Networks, after facing the original charges that resulted in Siemens CEO Klaus Kleinfeld resigning along with Chairman Heinrich von Pierer. The company’s goal was “to be known for operating with the highest standards of ethics and integrity,” officials said at the time. Nokia Siemens is not mentioned in the current SEC report.
Siemens’ scam ran like a suspense novel. “The SEC's complaint alleges that between March 12, 2001, and Sept. 30, 2007, Siemens created elaborate payment schemes to conceal the nature of its corrupt payments, and the company's inadequate internal controls allowed the conduct to flourish. Siemens made thousands of payments to third parties in ways that obscured the purpose for, and the ultimate recipients of, the money,” the commission stated.
“Employees obtained large amounts of cash from cash desks, which were sometimes transported in suitcases across international borders for bribery. The authorizations for payments were placed on post-it notes and later removed to eradicate any permanent record. Siemens used numerous slush funds, off-books accounts maintained at unconsolidated entities, and a system of business consultants and intermediaries to facilitate the corrupt payments.”
“Siemens made at least 4,283 payments, totaling approximately $1.4 billion, to bribe government officials in return for business to Siemens around the world. In addition, Siemens made approximately 1,185 separate payments to third parties totaling approximately $391 million, which were not properly controlled and were used, at least in part, for such illicit purposes as commercial bribery and embezzlement.”
Siemens said it appointed Dr. Theo Waigel, the former German Minister of Finance, as compliance monitor and created a Web page devoted to the charges.