By Cary O'Reilly and Karin Matussek
Tuesday, December 16, 2008
Siemens AG, Europe's largest engineering company, pleaded guilty to violating U.S. anti-corruption laws and will pay $1.6 billion to settle bribery inquiries in the United States and Germany.
Siemens will pay $814 million in Germany, including a $274 million fine levied in 2007, Peter Solmssen, its top lawyer, said yesterday. The company also will pay $800 million in criminal and civil penalties in the United States for falsely accounting for $1.36 billion in bribes and questionable payments.
The Munich-based company, which had revenue of $77.3 billion in the year ended in September, has been embroiled in a bribery scandal since 2006, leading to investigations in at least a dozen countries. An investigation of former company executives is continuing and Siemens is cooperating, a U.S. prosecutor said.
"Bribery was nothing less than standard operating procedure at Siemens," Matthew Friedrich, acting U.S. assistant attorney general, said at a news conference. Means of payment included "the time-tested method of suitcases filled with cash."
U.S. District Judge Richard J. Leon accepted the plea at a hearing yesterday in Washington. No executive was charged. The company's Bangladesh and Venezuela units pleaded guilty to conspiracy to commit bribery charges, while the parent company did not, meaning Siemens can still bid on U.S. government contracts, Solmssen said.
From the mid-1990s until last year, Siemens units paid kickbacks and bribes to win contracts from Iraq's government in the United Nations oil-for-food program and for projects including commuter rail in Venezuela, mobile-phone networks in Bangladesh, power plants in Israel and traffic-control systems in Russia.
The company used off-the-books accounts to conceal the illegal payments, U.S. prosecutors said in the charging documents.
Siemens chief executive Peter Loescher, hired in July 2007 to clean up after the bribery scandal erupted, replaced half of the company's top executives and appointed division heads to eliminate decision-making by consensus on the Siemens board.
"We expressly regret that wrongdoing occurred in the past," Gerhard Cromme, chairman of the supervisory board, said at a news conference in Munich. "Considering how intimidating the magnitude of the case was, it seems like a miracle that so little time passed to reach a settlement with the authorities."
The settlements' amount "far outweighs" remaining probes in other countries, Cromme said. "Most of it is behind us."
None of the contracts won with the illegal bidding will have to be surrendered, and anyone receiving bribes from the company would have to be prosecuted by law enforcement authorities in his own country, Friedrich said.
Former German finance minister Theo Waigel will monitor the company's compliance with the terms of the U.S. settlement over the next four years, Siemens said.
"The settlement fines were less than the multibillion [dollar] fines most were anticipating," Nick Heymann, an analyst with Sterne Agee & Leach in New York, said in a note to investors. "The timing is important as well."
With a new U.S. administration starting early next year, resolution could have "easily stretched out" to at least late 2009, said Heymann, who recommends holding the stock.
Munich prosecutors are still investigating about 300 suspects, including former Siemens chief executives Heinrich von Pierer and Klaus Kleinfeld. Both men have denied wrongdoing.
Three former Siemens employees were convicted in Munich in the first two trials over the scandal this year. Former board member Johannes Feldmayer was found guilty and sentenced in a related case is Nuremberg last month.
The U.S. settlement includes a fine of $450 million for the company and units in Venezuela, Argentina and Bangladesh. Under the agreement with the Securities and Exchange Commission and the Justice Department, Siemens also will forfeit $350 million in profits.