Siemens pays $1.6B in fines to settle bribery charges

Paying bribes for business didn’t pay off for Siemens AG, as the company has agreed to pay $1.6 billion in fines to U.S. and European authorities.
The settlement, announced Dec. 15, takes care of criminal charges filed by the U.S. Department of Justice and the charges levied by the SEC in regard to violations of the Foreign Corrupt Practices Act.
Siemens has agreed to pay $350 million in disgorgement to settle the SEC charges, and a $450 million fine to the DoJ. The Munich-based company will also pay the Office of the Prosecutor General in Munich $569 million. In October of 2007, Siemens paid a fine of $285 million to the office.
Siemens had set up an elaborate scheme to pay bribes to foreign government officials to obtain business between 2001 and 2007, according to authorities, and the company paid more than $1.4 billion in bribes to secure business in Asia, Africa, Europe, the Middle East and the Americas. Authorities said Siemens netted $1.1 billion in profits on these transactions.
“Public companies that bribe foreign officials are confronting an increasingly well-coordinated international law enforcement effort,” SEC Chairman Christopher Cox said in a statement. “Siemens paid staggering amounts of money to circumvent the rules and gain business. Now, they will pay for it with the largest settlement in the history of the Foreign Corrupt Practices Act since it became law in 1977.”
‘Painful chapter’
Siemens officials said the settlement reflects the company’s cooperation with authorities and the company has instituted comprehensive compliance programs and extensive remediation efforts.
“Siemens is closing a painful chapter in its history,” Siemens Chairman Gerhard Cromme said in a statement. “Based on robust leadership processes, Siemens has established a sustainable culture of compliance.”
Peter Loscher, Siemens CEO and president, agrees.
“We regret what happened in the past,” Loscher said in a statement. “But we have learned from it and taken appropriate measures. Siemens is now a stronger company.”
According to authorities, bribes included the design and construction of metro transit lines in Venezuela, power plants in Israel, refineries in Mexico, developing mobile-phone networks in Bangladesh, national identity cards in Argentina and medical devices in Vietnam, China and Russia.
Authorities said the company created an elaborate payment scheme where employees obtained large amounts of cash from cash desks. Large amounts of money were transported in suitcases. The authorization for payments was documented on Post-It notes, which were later removed to eradicate any documentation. The company also used off-book accounts and a network of business consultants to facilitate the corrupt payments.
Authorities said the misconduct involved employees at all levels, including former senior management, and revealed a corporate culture that was at odds with the FCPA.
Without admitting or denying the SEC’s allegations, Siemens has consented to the entry of a court order permanently enjoining it from future violations of the FCPA. Siemens has been ordered to implement a FCPA compliant program, including an independent monitor for the next four years.