SIEMENS (FOREIGN BRIBERY ACTIONS)
United States: Department of Justice
United States: Securities and Exchange Commission
Germany: Munich Public Prosecutor's Office
Mexico: Ministry of Public Administration
Argentina: Anti-Corruption Authority
Germany: Wuppertal Public Prosecutor's Office
Germany: Frankfurt Public Prosecutor's Office
Germany: Nuremberg-Fuerth Public Prosecutor's Office
The following Siemens entities were involved in the Company's foreign bribery matters:
Siemens Akteingesellschaft ("Siemens AG" or "Siemens")
Siemens, S.A. (wholly-owned Siemens subsidiary in Argentina) ("Siemens Argentina")
Siemens Bangladesh, Ltd. (wholly-owned Siemens subsidiary in Bangladesh) ("Siemens Bangladesh")
Siemens, S.A. (wholly-owned Siemens subsidiary in Venezuela) ("Siemens Venezuela")
Siemens S.A.S. (wholly-owned Siemens subsidiary in France) ("Siemens France")
Siemens Sanayi ve Ticaret A.S. (wholly-owned Siemens subsidiary in Turkey) ("Siemens Turkey")
Osram Middle East FZE ("Siemens Middle East")
Gas Turbine Technologies S.p.A. ("GTT")
Siemens Ltd. Nigeria (wholly-owned Siemens subsidiary in Nigeria) ("Siemens Nigeria")
Hellenic Telecommunications Organization S.A. ("OTE")
Multiple former Siemens executives were implicated in German foreign bribery proceedings, including:
Andreas Kley (former finance chief at Siemens' power-generation unit)
Horst Vigener (former consultant to Siemens' power-generation unit)
Michael Kutschenreuter (former financial head of Siemens' telecommunications unit)
Hans-Werner Hartmann (former head of accounting for Siemens' telecommunications unit)
Thomas Ganswindt (former Siemens AG management board member)
Uriel Sharef (former member of the central executive committee of Siemens AG)
Herbert Steffen (former chief executive officer of Siemens Argentina)
Andres Truppel (former chief financial officer of Siemens Argentina)
Ulrich Bock, Stephan Signer, and Eberhard Reichert (former senior executives of Siemens Business Services ("SBS"))
Carlos Sergi (served as intermediary and agent of Siemens in a bribe scheme)
Miguel Czysch (served as intermediary and agent of Siemens in a bribe scheme)
Civil lawsuit filed in New York by the state-owned Mexican entity Petróleos Mexicanos ("PEMEX") against:
SK Engineering and Construction Co. (a South Korean company)
DESCRIPTION OF BUSINESS
Transportation, telecommunications, medical devices, power plants, and oil refineries
Munich, Bavaria, Germany
NATIONALITY OF FOREIGN OFFICIALS
SUMMARY OF ALLEGATIONS
Completed Foreign Bribery Enforcement
Between 21 March 2001 and 30 December 2007, Siemens used a variety of methods to make approximately 4,283 illegal payments to government officials, totaling approximately USD 1.4 billion. These payments caused the Company to realize over USD 1.1 billion in profits during the relevant time period.
Siemens, a German company that was founded in 1847, began seeking business in less developed countries after it had difficulty competing for business in many Western countries after World War II. Siemens had a practice of making improper payments when competing for business outside of Germany. Before 1999, Siemens was not listed on a U.S. stock exchange and therefore not subject to the FCPA. In addition, these types of payments were not illegal under German law at the time and indeed were tax deductible as legitimate business expenses. In 1999, Germany ratified the Organisation of Economic Cooperation and Development ("OECD") Convention prohibiting transnational bribery. In 2001, Siemens listed its stock on the New York Stock Exchange thereby subjecting itself to the FCPA.
Despite the change in the law, Siemens management and employees did not change their corporate culture or their standard business practices. Siemens did not implement the necessary internal controls to ensure that improper payments were no longer made and indeed encouraged and rewarded such payments.
The payments made in various divisions of the Company between 2001 and 2007 included: (i) cash payments to Nigerian officials in connection with four telecommunications projects; (ii) payments to Enel, a partially state-owned company in Italy, in connection with two power plant projects; (iii) "bonus payments" made to Greek officials by Siemens' Communications Group; (iv) payments to officials in Venezuela in connection with metro projects in Valencia and Maracaibo; (v) payments to government customers in China in connection with seven metro construction projects; (vi) payments to a former director of the Israel Electric Company for four contracts to build and service power plants; (vii) payments to government customers in China for the installation of high voltage transmission lines; (viii) payments to officials in Bangladesh for a contract to install mobile telephone services; (ix) payments to senior officials in Argentina in order to win a contract to produce national identity cards; (x) payments in Vietnam in connection with the sale of medical devices; (xi) cash payments and vacation travel for doctors in China related to the sale of medical equipment; (xii) payments to government officials in Russia related to a World Bank-funded project for the design and installation of traffic equipment; (xiii) payments to senior officials at PEMEX, the Mexican state-owned oil company, to settle cost overruns in connection with three refinery modernization projects; (xiv) payments to government customers in Russia for the sale of medical equipment; and (xv) payments to officials in Vietnam related to a contract to supply equipment and services for a GSM network.
In addition to the payments listed above, Siemens paid approximately USD 1.7 million in kickbacks under 42 contracts to the government of Iraq in connection with the United Nations Oil for Food Program. These contracts resulted in over USD 124 million in revenue and approximately USD 38,226,537 in profits. The payments were described as after-sales service fees, even though Siemens did not render any services under the contracts.
Siemens used a variety of methods to conceal these payments and improperly recorded all 4,283 payments on its books and records. Approximately USD 982.7 million in payments were funneled through third parties. Siemens would typically enter into business consultant agreements under which the consultants would not perform any services other than funneling bribes. Siemens routed more than USD 211 million in bribes through slush funds that were often maintained by former Siemens executives, third parties, or affiliated companies. Siemens also used cash to pay approximately USD 160.4 million in bribes. Employees with the Communications Group would obtain cash from "cash desks" maintained by the Siemens Real Estate Group. Employees would pick up hundred of thousands of dollars in cash and would then transport it, sometimes in suitcases, across borders to pay bribes. In addition to the other methods, Siemens used a number of internal accounts to make more than USD 16.2 million in payments. These accounts were intended to make payments on transactions between two Siemens entities; however, Siemens often used these accounts to make payments to third parties.
New Indictments of Individuals
On 13 December 2011, the U.S. Department of Justice ("DOJ") charged eight former executives and agents of Siemens AG and its subsidiaries for allegedly engaging in a decade-long scheme to bribe senior government officials in Argentina to secure, implement and enforce a USD 1 billion contract with the government of Argentina to produce national identity cards. The indictment charges the defendants and their co-conspirators with conspiracy to violate the FCPA and the wire fraud statute, money laundering conspiracy, and wire fraud.
The U.S. Securities and Exchange Commission ("SEC") also filed a civil action on related charges alleging that over USD 100 million in bribes were paid in connection with Siemens' efforts to secure the contract and obtain the profits from that contract. The indictments come three years after Siemens AG, as a company, resolved FCPA-related charges with the DOJ and SEC. The SEC alleges that in furtherance of the scheme, the defendants falsified documents, including invoices and sham consulting contracts, participated in meetings in the United States to negotiate the terms of bribe payments, and made use of U.S. bank accounts to pay bribes. According to the SEC's complaint, the bribery scheme lasted for more than a decade, from approximately 1996 until early 2007.
On 19 February 2013, Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York dismissed the SEC's action against Herbert Steffen (one of the defendants) for lack of personal jurisdiction.
New Foreign Bribery Investigations
Siemens described several ongoing foreign bribery investigations as follows in its SEC Form 6-K filed on 10 November 2011:
"As previously reported, Siemens AG voluntarily reported a case of attempted public corruption in connection with a 2010 project in Kuwait to the U.S. Department of Justice, the U.S. Securities and Exchange Commission, and the Munich public prosecutor in May 2011. Siemens is cooperating with the authorities in their ongoing investigations which also relate to certain employees.
"In July 2011, the Nuremberg-Fuerth public prosecutor notified Siemens AG of an investigation against several employees in connection with payments related to the healthcare business in the Caribbean. Siemens is cooperating with the public prosecutor.
"In July 2011, the Munich public prosecutor notified Siemens AG of an investigation against an employee in connection with payments to a supplier related to the oil and gas business in Central Asia entered into from 2000 to 2009. Siemens is cooperating with the public prosecutor."
Siemens previously described several other ongoing foreign bribery investigations in its 2010 SEC Form 20-F:
"As previously reported, the public prosecutor in Wuppertal, Germany, is conducting an investigation against Siemens employees regarding allegations that they participated in bribery related to the awarding of an EU contract for the refurbishment of a power plant in Serbia in 2002. In April 2010, the public prosecutor discontinued the investigation . . . As previously reported, in August 2007, the Nuremberg-Fuerth public prosecutor began an investigation into possible violations of law in connection with the United Nations Oil-for-Food Programme. In December 2008, the public prosecutor discontinued the investigation with respect to all persons accused . . . On June 23, 2010, the Frankfurt public prosecutor searched premises of Siemens in Germany in response to allegations of questionable payments relating to an Industry project in Thailand. Siemens is cooperating with the authority."
Siemens described its World Bank debarment as follows in its 2010 SEC Form 20-F:
"In April 2009, Siemens AG received a 'Notice of Commencement of Administrative Proceedings and Recommendations of the Evaluation and Suspension Officer' from the World Bank, which comprises the International Bank for Reconstruction and Development as well as the International Development Association, in connection with allegations of sanctionable practices during the period 2004-2006 relating to a World Bank-financed project in Russia. On July 2, 2009, the Company entered into a global settlement agreement with the International Bank for Reconstruction and Development, the International Development Association, the International Finance Corporation and the Multilateral Investment Guarantee Agency (collectively, the World Bank Group) to resolve World Bank Group investigations involving allegations of corruption by Siemens. In the agreement, Siemens voluntarily undertakes to refrain from bidding in connection with any project, program, or other investment financed or guaranteed by the World Bank Group (Bank Group Projects) for a period of two years, commencing on January 1, 2009 and ending on December 31, 2010. Siemens is not prohibited by the voluntary restraint from continuing work on existing contracts under Bank Group Projects or concluded in connection with World Bank Group corporate procurement provided such contracts were signed by Siemens and all other parties thereto prior to January 1, 2009. The agreement provides for exemptions to the voluntary restraint in exceptional circumstances upon approval of the World Bank Group. Siemens also had to withdraw all pending bids, including proposals for consulting contracts, in connection with Bank Group Projects and World Bank Group corporate procurement where the World Bank Group has not provided its approval prior to July 2, 2009. Furthermore, Siemens is also required to voluntarily disclose to the World Bank Group any potential misconduct in connection with any Bank Group Projects. Finally, Siemens has undertaken to pay U.S.$100 million to agreed anti-corruption organizations over a period of not more than 15 years. In fiscal 2009, the Company took a charge to Other operating expense to accrue a provision in the amount of €53 million relating to the global settlement agreement with the World Bank Group. In November 2009, Siemens Russia OOO and all its controlled subsidiaries were, in a separate proceeding before the World Bank Group, debarred for four years from participating in Bank Group Projects. Siemens Russia OOO did not contest the debarment."
Siemens provided the following update regarding its United Nations debarment in its SEC Form 6-K filed on 10 November 2011:
"As previously reported, on March 9, 2009, Siemens AG received a decision by the Vendor Review Committee of the United Nations Secretariat Procurement Division (UNPD) suspending Siemens AG from the UNPD vendor database for a minimum period of six months. The suspension applied to contracts with the UN Secretariat and stemmed from Siemens AG's guilty plea in December 2008 to violations of the U.S. Foreign Corrupt Practices Act. On December 22, 2009, Siemens AG filed a request to lift the existing suspension. Effective January 1, 2011, the UNPD lifted the suspension against Siemens AG."
Related Civil Litigation
Siemens described the resolution of several related civil litigation matters as follows in its 2010 SEC Form 21-F:
"As already disclosed by the Company in press releases, Siemens AG asserted claims for damages against former members of the Managing and Supervisory Board. The Company based its claims on breaches of organizational and supervisory duties in view of the accusations of illegal business practices that occurred in the course of international business transactions in the years 2003 to 2006 and the resulting financial burdens for the Company. On December 2, 2009 Siemens reached a settlement with nine out of eleven former members of the Managing and Supervisory Board. As required by law, the settlements between the Company and individual board members were subject to approval by the Annual Shareholders' Meeting. The Company reached a settlement agreement with its directors and officers (D&O) insurers regarding claims in connection with the D&O insurance of up to €100 million. The Annual Shareholders' Meeting approved all nine settlements between the Company and the former members of the Managing and Supervisory Board on January 26, 2010. The shareholders also agreed to the settlement with respect to claims under the D&O insurance. During the second quarter of fiscal 2010, Siemens AG received certain benefits as required under the aforementioned settlement agreements with the result that an amount of €96 million net of related cost was recognized primarily in Other operating income. Thereof €84 million resulted from the settlement agreement with the D&O insurers and €12 million resulted from settlement agreements with former board members. The former board members used claims they had against the Company to offset a portion of their obligations under the aforementioned settlement agreements. The remaining amount was or will be settled by the former board members in cash. On January 25, 2010, Siemens AG filed a lawsuit with the Munich District Court I against the two former board members who were not willing to settle, Thomas Ganswindt and Heinz-Joachim Neubürger. The complaint was served upon the defendants. The defendants asked Siemens AG to produce certain documents.
"As previously reported, an alleged holder of Siemens American Depositary Shares filed a derivative lawsuit in February 2007 with the Supreme Court of the State of New York against certain current and former members of Siemens' Managing and Supervisory Boards as well as against Siemens as a nominal defendant, seeking various forms of relief relating to the allegations of corruption and related violations at Siemens. The alleged holder of Siemens American Depository Shares voluntarily withdrew the derivative action in September 2009.
"As previously disclosed, in June 2008, the Republic of Iraq filed an action requesting unspecified damages against 93 named defendants with the United States District Court for the Southern District of New York on the basis of findings made in the 'Report of the Independent Inquiry Committee into the United Nations Oil-for-Food Programme.' Siemens S.A.S. France, Siemens A. Ş. Turkey and OSRAM Middle East FZE, Dubai, are among the 93 named defendants. Process was served upon all three Siemens subsidiaries. The three Siemens subsidiaries will defend themselves against the action.
"As previously reported, Siemens AG had filed a request for arbitration against the Republic of Argentina (Argentina) with the International Center for Settlement of Investment Disputes (ICSID) of the World Bank. Siemens AG claimed that Argentina had unlawfully terminated its contract with Siemens for the development and operation of a system for the production of identity cards, border control, collection of data and voters' registers (DNI project) and thereby violated the Bilateral Investment Protection Treaty between Argentina and Germany (BIT). Siemens AG sought damages for expropriation and violation of the BIT of approximately U.S.$500 million. A unanimous decision on the merits was rendered by the ICSID arbitration tribunal on February 6, 2007, awarding Siemens AG compensation in the amount of U.S.$217.8 million, plus compound interest thereon at a rate of 2.66% since May 18, 2001. The tribunal also ruled that Argentina is obligated to indemnify Siemens AG against any claims of subcontractors in relation to the project (amounting to approximately U.S.$44 million) and, furthermore, that Argentina would be obligated to pay Siemens AG the full amount of the contract performance bond (U.S.$20 million) in the event this bond was not returned. The time period set by the tribunal for returning the contract performance bond subsequently elapsed without delivery. As previously reported, Argentina subsequently filed applications with the ICSID aiming at the annulment and reversal of the decision and a stay of enforcement of the arbitral award. On August 12, 2009, Argentina and Siemens AG reached an agreement to mutually settle the case and discontinue any and all civil proceedings in connection with the case without acknowledging any legal obligations or claims. No payment was made by either party."
Siemens describes the investigation being conducted by Argentina's Anti-Corruption Authority (still ongoing as of April 2012), based on the award of a contract for data and voter registration cards (DNI project) to Siemens in 1998. The premises of Siemens Argentina and Siemens IT Services S.A. were searched in August 2008 and February 2009, and the SEC and DOJ filed indictments against nine individuals based on the AACA findings.
Siemens described the conclusion of other civil litigation as follows in its SEC Form 6-K filed on 10 November 2011:
"As previously reported, Siemens was approached by a competitor to discuss claims it believed it had against the Company. The alleged claims related to allegedly improper payments by the Company in connection with the procurement of public and private contracts. Siemens and the competitor were able to resolve the matter on mutually agreeable terms.
"As previously reported, a securities class action was filed in December 2009 against Siemens AG with the United States District Court for the Eastern District of New York seeking damages for alleged violations of U.S. securities laws. In March 2011, the Court granted the Company's motion to dismiss the action. The plaintiffs' motion to reconsider was denied by the court. Plaintiffs did not appeal the court's decision. Accordingly, the dismissal is final."
On 10 February 2010, a Greek Parliamentary Investigation Committee began investigating whether Greek officials received bribes from Siemens. The Greek Public Prosecutor's office is also investigating fraud and bribery allegations involving former board members and former executives of Siemens. The parliamentary committee has stated that Greece suffered at least EUR 2 billion worth of damage due to Siemens' illicit activity.
In a statement to investors on 25 April 2012 detailing current legal proceedings, Siemens disclosed an investigation by the Munich public prosecutor, which notified the Company in February 2012 of a request for mutual assistance in criminal matters by a foreign authority, involving a subsidiary located in "North West Europe in connection with alleged payments to employees of a Russian company between 1999 and 2006." The Company made an identical statement in its SEC Form 6-K also filed on 25 April 2012.
In the same 25 April 2012 statement and SEC Form 6-K, Siemens describes a lawsuit filed by the Hellenic Telecommunications Organization S.A. ("OTE") in July 2008, in the District Court of Munich. The lawsuit sought disclosure by Siemens AG of information pertaining to "allegations of undue influence and/or acts of bribery in connection with contracts concluded between Siemens AG and OTE from 1992 to 2006." After being granted access to some of Siemens' files, OTE expanded its claim, requesting at least EUR 57.07 million in damages from Siemens for alleged bribes to its employees. Siemens and OTE are currently negotiating a settlement.
PEMEX filed a RICO lawsuit against Siemens AG and SK Engineering & Construction Co., claiming USD 500 million in damages for bribery conducted by the two companies in 1997 and thereafter, when Conproca, a consortium of these two companies, bribed officials in order to win a lucrative contract for the Cadereyta project in northern Mexico. Later, when cost overruns would have had consequences pursuant to the project contract, the consortium paid additional bribes in order to avoid the cost overrun status.
PEMEX also notes that it is countering Conproca's attempt to enforce an arbitration award of over USD 350 million for cost overruns; it alleges that the arbitration award is based on false documents executed by PEMEX officials stating that the cost overruns were approved. In fact, PEMEX claims, the cost overrun approvals were not valid because they resulted from bribes to high level officials in PEMEX. PEMEX also stated that until recently, the identity of the corrupt PEMEX officials was not known, but that now a Mexican criminal investigation is underway, and has revealed that some officials at the highest levels of the PEMEX hierarchy were bribed.
RATIO OF IMPROPER PAYMENTS TO BUSINESS ADVANTAGE
Approximate Alleged Payments to Foreign Officials from 2001 to 2006 Business Advantage Allegedly Obtained USD 1.4 billion USD 1.1 billion (profits) Approximate Alleged Payments to Venezuelan Officials Business Advantage Allegedly Obtained USD 16.7 million USD 642 million (revenue) Approximate Alleged Payments to Argentine Officials Business Advantage Allegedly Obtained Over USD 100 million USD 1 billion (contracts) Approximate Alleged Payments to Bangladeshi Officials Business Advantage Allegedly Obtained USD 5.3 million USD 40.9 million (contracts) Approximate Alleged Kickbacks to Iraqi Government Business Advantage Allegedly Obtained USD 1.7 million USD 124 million (revenue)USD 38,226,537 (profits) Approximate Alleged Payments to Chinese Officials for Metro Trains and Signaling Devices Contracts Business Advantage Allegedly Obtained USD 22 million to business consultants; unspecified amount to government officials Over USD 1 billion (contracts) Approximate Alleged Payments to Israeli Officials Business Advantage Allegedly Obtained USD 20 million USD 786 million (contracts) Approximate Alleged Payments to Chinese Officials for High Voltage Transmission Lines Contracts Business Advantage Allegedly Obtained USD 25 million USD 838 million (contracts) Approximate Alleged Payments to Nigerian Officials Business Advantage Allegedly Obtained USD 4.5 million USD 130 million (contracts) Approximate Alleged Payments to Vietnamese Officials for Medical Device Sales Business Advantage Allegedly Obtained USD 183,000 USD 6 million (revenue) Approximate Alleged Payments to Chinese Officials for Medical Equipment Sales Business Advantage Allegedly Obtained USD 14.4 million;trips to Las Vegas and other holiday destinations USD 295 million (revenue) Approximate Alleged Payments to Russian Officials for a Traffic Control System Contract Business Advantage Allegedly Obtained USD 741,419 USD 27 million (contracts) Approximate Alleged Payments to Mexican Officials in Connection With Settlement of Cost Overrun Claim Business Advantage Allegedly Obtained USD 2.6 million to a business consultant; unspecified amount to Mexican officials Settlement of cost overrun claims in connection with oil refinery project Approximate Alleged Payments to Russian Officials for Medical Equipment Sales Business Advantage Allegedly Obtained Over USD 55 million to consultant; unspecified amount to Russian officials Unspecified Approximate Alleged Payments to Vietnamese Officials for GSM Network Contract Business Advantage Allegedly Obtained USD 140,000 USD 35 million (contracts)
HOW CONDUCT WAS DISCOVERED
In November 2006, German law enforcement executed a series of dawn raids on Siemens offices and the homes of senior executives. Siemens then voluntarily disclosed the conduct to the DOJ and SEC.
Please see above with regard to the investigations currently ongoing.
On 15 December 2008, Siemens settled charges with the DOJ, the SEC, and the Munich Prosecutor's Office for a record-breaking USD 1.6 billion in fines and penalties.
U.S. Enforcement against Siemens
Under its plea agreement with the DOJ, Siemens pleaded guilty to two counts of violating the books and records and internal controls provisions of the FCPA. Siemens Argentina pleaded guilty to one count of conspiracy to violate the FCPA and Siemens Venezuela and Siemens Bangladesh each pleaded guilty to one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA. Siemens was required to pay a USD 448.5 million criminal fine and Siemens Argentina, Bangladesh, and Venezuela were each required to pay a USD 500,000 criminal fine, bringing the total amount in criminal fines in the United States to USD 450 million.
Siemens, without admitting or denying the SEC's allegations, consented to the entry of a final judgment permanently enjoining the Company from future violations of the FCPA's anti-bribery, books and records, and internal controls provisions. Siemens was also required to pay USD 350 million in disgorgement of profits.
Both the DOJ and SEC noted Siemens' extraordinary cooperation during the investigation and the extensive remedial measures undertaken by the Company, including the scope of its internal investigation after disclosing the conduct to the U.S. enforcement authorities, disciplinary actions against individuals involved, and the restructuring of the Company's compliance program.
On 9 January 2009, the DOJ announced that it had filed a forfeiture action against accounts in Singapore held by multiple account holders. The funds in the accounts were allegedly related to bribes paid by Siemens and China Harbor Engineering to Arafat "Koko" Raman, the son of Bangladesh's former prime minister in connection with the award of a public works project in Bangladesh. The funds allegedly were paid in U.S. dollars and flowed through banks in the United States before being deposited into accounts in Singapore.
U.S. Enforcement against Individuals
On 13 December 2011, the DOJ charged eight former executives and agents of Siemens AG and its subsidiaries for allegedly engaging in a decade-long scheme to bribe senior government officials in Argentina to secure, implement, and enforce a USD 1 billion contract with the government of Argentina to produce national identity cards. The defendants in the DOJ action, Uriel Sharef, Herbert Steffen, Andres Truppel, Ulrich Bock, Eberhard Reichert, Stephan Signer, Carlos Sergi, and Miguel Czysch, are not U.S. citizens and reside outside of the United States. Unless the U.S. government obtains extradition of the men, they cannot be tried on the criminal charges.
The SEC also filed a civil action on related charges against seven men, alleging that over USD 100 million in bribes were paid in connection with Siemens' efforts to secure the contract and obtain the profits from that contract. As for these charges, legal process requires that the defendants be served with the complaint in the lawsuit, but SEC lawyers were unable to serve the four German defendants (Sharef, Signer, Steffen, and Bock) via the Hague Convention, absent the cooperation of the German government, which responded thus to requests for assistance in service:
"The German government has recently advised that an action by the SEC seeking civil penalties for violations of U.S. federal securities laws is not, under German law, a 'civil or commercial matter' within the meaning of the Hague Convention."
Therefore, the SEC attorneys requested permission to serve the four men through newspaper notices and emails to their attorneys. On 26 June 2012, the U.S. court agreed to this request.
On 12 October 2012, Herbert Steffen filed a motion to dismiss for lack of jurisdiction and for failure to satisfy the statute of limitations. On 19 February 2013, Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York granted Steffen's motion to dismiss for lack of personal jurisdiction, saying that Steffen did not have sufficient contacts with the United States to meet the requirements of personal jurisdiction and that exercising jurisdiction over him would be unreasonable due to his age and other factors.
Regendantz settled the SEC charges in December 2011 without admitting or denying the allegations by consenting to the entry of a final judgment permanently enjoining him from committing future violations. He paid a EUR 30,000 administrative fine ordered by the Munich prosecutor (equivalent to USD 40,000).
On 15 January 2013, a former compliance officer for Siemens' Chinese subsidiary filed a lawsuit against Siemens in federal court in New York. The former employee, a Taiwanese man named Meng-Lin Liu, claimed that in May 2011, one week after presenting evidence of Siemens' continued internal controls violations and the Company's circumvention of its plea agreement with U.S. authorities, he was notified that his contract would not be renewed, and that he should not report to work. In the complaint, Liu alleges that the evidence he submitted to the SEC and Siemens' executives revealed the Company's practice of submitting inflated bids for the sale of medical imaging equipment in China, and then selling the equipment at lower prices to intermediaries, for resale to public hospitals.
On 14 December 2012, La Nueva reported that a federal judge in Argentina held a hearing regarding the possible extradition of former Siemens AG CFO Andres Truppel to the United States to face criminal charges. Main Justice reported on 18 March 2013 that Truppel is one of four defendants who also have failed to respond to the civil suit brought by the SEC, and that the SEC is seeking to have Truppel be considered in default of the civil charges.
The Wall Street Journal reported on 15 April 2013 that Uriel Sharef agreed to pay USD 275,000 to settle the SEC's civil suit against him. Sharef did so without admitting or denying the SEC's allegations.
On 4 February 2014, two former Siemens executives were ordered to pay a combined USD $1.46 million for their roles in a USD $1 billion Argentine government contract bribery scheme, the largest Foreign Corrupt Practices Act penalties ever levied against individuals. U.S. District Judge Shira A. Scheindlin entered a default judgment against Mr. Signer and Mr. Bock and ordered each to to pay a USD $524,000 civil penalty and Mr. Block to pay an additional USD $413,957 for disgorgement. The two German nationals allegedly bribed Argentine government officials as part of a decade-long scheme to retain a USD $1 billion government contract to produce Argentine national identity cards.
Germany Enforcement against Siemens
In its settlement with the Munich Prosecutor's Office, Siemens (apart from its telecommunications group) pleaded guilty to charges related to a corporate failure to supervise its officers and employees and paid a total of EUR 395 million (approximately USD 569 million), including a EUR 250,000 corporate fine and EUR 394.75 million in disgorgement of profits. In a related action, Siemens' telecommunications operating group settled charges with the Munich Prosecutor's Office in October 2007, and paid EUR 201 million in fines and penalties (approximately USD 287 million), including a EUR 1 million fine and EUR 200 million in disgorgement of profits.
In addition to monetary fines and penalties, the enforcement agencies required Siemens to retain an independent compliance monitor for a four-year period. Siemens and the enforcement agencies agreed to the appointment of Dr. Theodor Waigel, the former German finance minister, as its independent monitor. Joseph Warrin of Gibson, Dunn & Crutcher LLP was appointed to serve as counsel to the monitor with respect to the requirements of the FCPA.
Germany Enforcement against Individuals
On 14 May 2007, Andreas Kley, the former finance chief at Siemens' power-generation unit, and Horst Vigener, a former consultant to Siemens' power-generation unit, were convicted in a Darmstadt court for paying about EUR 6 million in bribes from 1999 to 2002 to help Siemens win gas-turbine supply contracts with Enel, an Italian energy company. The contracts were valued at approximately EUR 450 million. Kley received a two-year suspended sentence and Vigener a nine-month suspended sentence. According to press reports, both sentences were less than prosecutors had requested.
On 20 April 2010, Michael Kutschenreuter, the former financial head of Siemens' telecommunications unit, was found guilty of breach of trust and abetting bribery in a Munich court. He was placed on probation for two years and fined EUR 160,000. On the same day, Hans-Werner Hartmann, head of accounting for the telecommunications unit, was placed on probation for 18 months and fined EUR 40,000.
On 19 May 2011, it was reported that Berlin prosecutors dropped its case against former Siemens board member, Thomas Ganswindt, who used to run the Company's telecommunications unit, in exchange for Ganswindt agreeing to make a payment of EUR 175,000 euros (USD 250,000) to five charities. Siemens' former finance chief Heinz-Joachim Neubuerger is still fighting charges.
On 14 June 2011, it was reported that a Siemens management board member had been charged in connection with breach of trust in connection with bribes paid (through slush funds, phoney companies and middlemen) in Argentina between 2003 and 2007. In its SEC Form 6-K for the first quarter of 2012, Siemens states, "Argentinean Anti-Corruption Authority is conducting an investigation against individuals into corruption of government officials in connection with the award of the contract for the DNI project to Siemens in 1998. Searches were undertaken at the premises of Siemens Argentina and Siemens IT Services S.A. in Buenos Aires in August 2008 and in February 2009. The Company is cooperating with the Argentinean Authorities. The Argentinean investigative judge also repeatedly requested judicial assistance from the Munich public prosecutor and the federal court in New York. In December 2011, the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice filed an indictment against nine individuals based on the same facts as the investigation of the Argentinean Anti-Corruption Authority. Most of these individuals are former Siemens employees. The former member of the Managing Board of Siemens AG, Dr. Uriel Sharef, is also involved. Siemens AG is not party to the proceedings."
In a separate suit arising out of the earlier investigation, Carlos Moran, formerly a government investigator in Argentina, brought a claim in federal court in Miami against Siemens AG and Siemens' subsidiary in Argentina. Moran claims that Siemens paid people to physically attack him after he blew the whistle on Siemens' bid for the national identity card project.
Settlement with the Government of Greece
In February 2012, Siemens entered into an agreement with the Greek government, pledging to forgo EUR 80 million in outstanding Greek debt in exchange for no claims for reparations resulting from the bribery scandal, which purportedly cost Greek taxpayers EUR 2 billion in overpayment of Siemens contracts. All told, Greece owes Siemens approximately EUR 150 million. The arrangement requires Greece to invest EUR 90 million with Siemens in new projects.
In a press release on 5 April 2012, Siemens confirmed the arrangement, announcing that the Greek Parliament had ratified the settlement agreement. The settlement approves Siemens' forgiving of EUR 80 million owed to it by the Greek government, for supplies delivered to Greek medical facilities over a period of years. Siemens has agreed to spend up to EUR 90 million on "transparency initiatives and anti-corruption programs," and on research. Siemens also agreed to spend over EUR 100 million on its own commercial activities in Greece, thereby encouraging economic growth and increasing employment within Greece.
Mexican officials are investigating whether officials in the state-owned PEMEX received bribes from the Conproca consortium, composed of Siemens AG and SK Engineering and Construction Co.
The new foreign bribery investigations remain ongoing at this time.
According to a 31 July 2013 Reuters article “U.S. Court Ends PEMEX Bribery Case Against Siemens, SK Engineering” U.S. District Judge Louis Stanton of Manhattan has dismissed a lawsuit brought by Mexican oil company PEMEX against Siemens. The judge said that the court could not address extraterritorial claims and that PEMEX could not bring the lawsuit because it had not shown its claims had enough contact with the U.S. An attorney for PEMEX said that it will be evaluating the court’s decision and considering its options.
Theodor Waigel (German monitor); Joseph Warin (U.S. counsel to German monitor)
- Companies can face criminal charges for violations of the books and records and internal controls provisions of the FCPA.
- U.S. enforcement authorities will coordinate with foreign enforcement authorities in order to investigate and resolve FCPA enforcement actions.
- Company executives may face individual prosecutions long after corporate resolution of bribery matters.
- Multiple private civil lawsuits may be spawned by corruption investigations by public enforcement bodies.
New York Times: "2 Former Siemens Officials Convicted for Bribery" (15 May 2007)
Criminal Information: U.S. v. Siemens Aktiengesellschaft (12 December 2008)
Complaint: SEC v. Siemens Aktiengesellschaft (12 December 2008)
Criminal Information: U.S. v. Siemens S.A. (Argentina) (12 December 2008)
Criminal Information: U.S. v. Siemens Bangladesh Limited (12 December 2008)
Criminal Information: U.S. v. Siemens S.A. (Venezuela) (12 December 2008)
DOJ and Siemens: Joint Statement (12 December 2008)
DOJ Press Release: "Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines" (15 December 2008)
DOJ: Transcript of Press Conference Announcing Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations (15 December 2008)
DOJ: Plea Offer to Siemens (15 December 2008)
SEC Litigation Release: "SEC Files Settled Foreign Corrupt Practices Act Charges Against Siemens AG for Engaging in Worldwide Bribery with Total Disgorgement and Criminal Fines of Over $1.6 Billion" (15 December 2008)
Statement of Offense: U.S. v. Siemens Aktiengesellschaft (15 December 2008)
DOJ Press Release: "Department of Justice Seeks to Recover Approximately $3 Million in Illegal Proceeds from Foreign Bribe Payments" (9 January 2009)
Siemens: SEC Form 20-F (4 December 2009)
Deutsche Welle: "Ex-Siemens executives found guilty in bribery case" (21 April 2010)
Siemens: SEC Form 6-K (11 November 2010)
Siemens: SEC Form 20-F (2 December 2010)
Bloomberg: "First Ex-Siemens Executive to Stand Trial in Munich in Corruption Scandal" (20 January 2011)
Siemens: SEC Form 6-K (31 January 2011)
AFP: "Corruption case dropped against Siemens exec" (19 May 2011)
Bloomberg: "Ex-Siemens Board Member Charged Over Argentina Bribery Payments" (14 June 2011)
Munich Prosecutor's Office Press Release: "Pressemitteilung der Staatsanwaltschaft Munchen I vom 14.06.2011: Weitere Anklage im Komplex Siemens" (14 June 2011)
Siemens: SEC Form 6-K (10 November 2011)
DOJ Press Release: "Eight Former Senior Executives and Agents of Siemens Charged in Alleged $100 Million Foreign Bribe Scheme" (13 December 2011)
SEC: Complaint against Siemens Executives, SDNY (13 December 2011)
SEC Litigation Release: "SEC Charges Seven Former Siemens Executives with Bribing Leaders in Argentina" (13 December 2011)
Siemens Press Release: "Legal proceedings" (24 January 2012)
Siemens: "Interim Report, 1st Quarter 2012" (27 January 2012)
Siemens Press Release: "Siemens and the Hellenic Republic reach a settlement agreement and mark a new beginning" (5 April 2012)
Siemens Press Release: "Legal proceedings" (25 April 2012)
Siemens: SEC Form 6-K (25 April 2012)
Siemens: Complaint, Moran v. Siemens (12 September 2012)
Herbert Steffen: Motion to Dismiss (12 October 2012)
Herbert Steffen: Memorandum in Support of Motion to Dismiss (12 October 2012)
Siemens Press Release: "Legal proceedings" (8 November 2012)
La Nueva: "Exdirectivo de Siemens: Pedido de extradicion" (14 December 2012)
SDNY: Opinion Granting Herbert Steffen's Motion to Dismiss (19 February 2013)
Main Justice: "SEC Asks to Record Default by Another Siemens Defendant" (18 March 2013)
Wall Street Journal: "Former Siemens Exec to Pay $275K Fine to Settle SEC Case" (15 April 2013)
Reuters: U.S. Court Ends PEMEX Bribery Case Against Siemens SK Engineering (31 July 2013)
Law360 - Ex Executives of Siemens Fined 1.5 Million
Aerospace/Defense/SecurityEngineering/ConstructionExtractive IndustriesGifts, Hospitality and TravelHealth CareIntermediariesManufacturer/Service ProviderNon-U.S. Foreign Bribery Enforcement - Formal ProceedingsNon-U.S. Foreign Bribery Enforcement - InvestigationsOil-for-FoodOngoing U.S. FCPA InvestigationsProsecution of IndividualsSubsidiariesTechnology/SoftwareTransportation/CommunicationsVoluntary Disclosure