Siemens guilty of global fraud

Officials from Siemens AG traveled the globe with suitcases full of cash, paying more than a billion dollars in bribes to win lucrative public works contracts in countries such as Argentina, Bangladesh and Venezuela, the Justice Department said Monday.

The German engineering company now will pay a total of $1.6 billion in fines to U.S. and German authorities, and remain under the supervision of an independent monitor for four years. The company pleaded guilty Monday in U.S. District Court in the District to violating the Foreign Corrupt Practices Act (FCPA) by failing to maintain proper internal controls and keeping required records. The fine is the largest ever under that statute.

“Siemens’ pattern of bribery was unprecedented in scale and geographic reach,” said Linda Chatman Thomsen, director of the Security Exchange Commission’s (SEC) division of enforcement.

Authorities say the company, which performs all manner of infrastructure projects, paid $1.4 billion in bribes in recent years to win contracts in Asia, Africa, Europe, the Middle East and South and Central America.

“The people who get hurt the worst are often the residents of the poorest countries on the face of the earth,” said Acting Assistant Attorney General Matthew Friedrich.

Prosecutions of similar high-level corruption, or kleptocracy, cases have increased in recent years at the request of the Bush administration. From 2001 to 2004, the Justice Department prosecuted 17 such cases. Since then, that number has increased to 42.

Joseph Persichini, the FBI assistant director in charge of the Washington field office, said his office has dedicated far more resources to such investigations, which he called “tedious.”

Siemens AG’s guilty pleas stem from bribes paid to win a national identity card contract in Argentina, a mobile telephone contract in Bangladesh and a rail system construction contract in Venezuela.

Authorities say the company took great pains to cover its illicit activity, such as keeping secret slush funds in offshore banks, funneling bribe money through shell companies and using removable Post-it notes for signatures on forms to conceal the identities of officials who authorized such payments.

In 2006, German officials raided Siemens’ offices and the homes of its employees around Munich.

Shortly after the raids, according to court documents, the company told the SEC, which has civil enforcement authority related to FCPA, about possible law violations before the company embarked on an internal audit. U.S. law required Siemens AG to maintain certain internal controls and record-keeping standards since 2001, when it was first listed on the New York Stock Exchange in 2001.

The scope of the audit was “unprecedented,” authorities said.

“Siemens has provided extraordinary cooperation in connection with the investigation of its past corporate conduct, and has undertaken uncommonly sweeping remedial action in response to the discovery of its prior misconduct,” a sentencing memorandum filed by prosecutors stated. “In addition, Siemens has provided substantial and timely assistance in the investigation of other persons and entities.”

Though he would not say why Siemens AG was not charged with bribery, Mr. Friedrich hinted that cooperation with the U.S. government was a factor.

Other factors determining what charges to pursue, according to the sentencing memorandum, included “collateral consequences, including whether there would be disproportionate harm to the shareholders, pension holders, employees, and other persons not proven personally culpable, and the impact on the public, arising from the prosecution.”

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