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What is Siemens FCPA Cases or bribery scandal?
By Amarendra Bhushan for CEOWORLD Magazine Updated:December 16, 2008
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Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines
Coordinated Enforcement Actions by DOJ, SEC and German Authorities Result in Penalties of $1.6 Billion
Siemens Aktiengesellschaft (Siemens AG), the Germany-based manufacturer of industrial and consumer products, agreed to pay more than $1.34 billion to American and European authorities to settle charges that it routinely used bribes. They pleaded guilty to violations of and charges related to the Foreign Corrupt Practices Act (FCPA), the Department of Justice and U.S. Securities and Exchange Commission announced.
At a hearing before U.S. District Judge Richard J. Leon in the District of Columbia, Siemens AG pleaded guilty to a two-count information charging criminal violations of the FCPA’s internal controls and books and records provisions. Siemens S.A.- Argentina (Siemens Argentina) pleaded guilty to a one-count information charging conspiracy to violate the books and records provisions of the FCPA. Siemens Bangladesh Limited (Siemens Bangladesh) and Siemens S.A. – Venezuela (Siemens Venezuela), each pleaded guilty to separate one-count informations charging conspiracy to violate the anti-bribery and books and records provisions of the FCPA. As part of the plea agreements, Siemens AG agreed to pay a $448.5 million fine; and Siemens Argentina, Bangladesh , and Venezuela each agreed to pay a $500,000 fine, for a combined total criminal fine of $450 million.
Europe’s largest conglomerate also agreed to co-operate with the US government’s continuing investigation in the case.
Siemens drew a line under its massive bribery scandal yesterday when it said it would pay €1bn ($1.36bn) in fines to US and German authorities and appointed an independent watchdog to monitor its compliance.
In the scandal that surfaced two years ago, prosecutors and the company’s internal investigation found some €1.3bn of suspected payments by managers to officials around the world to win contracts.
Under the terms of the plea agreement:
1) Siemens AG pled guilty to one count of failure to maintain internal controls and one count of books and records violations;
2) Siemens S.A. Argentina pled guilty to one count of conspiracy to violate the books and records provisions of the FCPA;
3) Siemens Bangladesh Limited pled guilty to a one count information charging conspiracy to violate the anti-bribery and books and records provisions; and
4) Siemens S.A. Venezuela pled guilty to a one count information charging conspiracy to violate the anti-bribery and books and records provisions.
Under the agreements, Siemens will pay a fine of $450 million, the largest criminal FCPA fine since the Act was passed in 1977. The company also agreed to retain an independent monitor for four years.
The charges are based on violations in Latin America and the middle east. From 2000 to 2002 four Siemens subsidiaries – Siemens Turkey, Siemens France, Osram Middle East and Gas Turbine – were awarded 42 contracts valued at more than $80 million with the Ministries of Electricity and Oil of Iraq under the United Nations Oil for Food Program. These contracts were secured by paying over $1.7 million in kickbacks to the Iraq government. The company netted over $38 million in profits. As with other OFP cases, the contract price was inflated prior to the submission of the contract to the U.N. for approval. The payments were improperly recorded on the books and records of the company.
Siemens’ subsidiaries in Latin America also violated the FCPA. Beginning in September 1998 and continuing through 2007 Siemens Argentina made over $31 million in corrupt payments to various Argentine officials. These payments were improperly recorded in the books and records as “consulting fees,” “legal fees” and other types of legitimate payments. These payments were made to obtain favorable business treatment in connection with a $1 billion national identity card project.
Siemens Venezuela also made corrupt payments beginning in October 2001. The subsidiary made over $18 million in corrupt payments to various Venezuelan officials to obtain favorable treatment in connection with two major metropolitan mass transit projects. Again, the payments were not properly recorded.
Finally, Siemens Bangladesh admitted that from May 2001 to August 2006 it made corrupt payment of over $5.3 million. The payments were made to obtain favorable treatment during the bidding process on a mobile telephone project.
The company also settled charges with the Munich Public Prosecutor’s Office and the SEC. With the former, Siemens AG agreed to pay about $569 million which includes a fine and disgorgement. To settle with the SEC, the company consented to the entry of a permanent injunction prohibiting future violations of the anti-bribery and books and records provision. In addition, the company agreed to disgorge $350 million in profits which does not include those in the payment under the Munich settlement.
Go to Press Release from the S.E.C. »
Go to Press Release from the Department of Justice »
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