Siemens AG said it will set aside €1 billion ($1.3 billion) in estimated fines from U.S. and German authorities investigating alleged bribery at the German conglomerate.The disclosure by Europe's largest engineering company by revenue suggests Siemens is nearing legal settlements with prosecutors -- and is possibly in line for a record U.S. fine for overseas bribery -- after German police raided Siemens's offices on suspicion of corruption two years ago. It also reflects Chief Executive Peter Löscher's broader plan to book one-time costs in fiscal 2008, so they don't weigh on results in 2009, when global business conditions are expected to deteriorate.
Siemens already signaled it would book around €3 billion in separate restructuring costs in the fourth quarter ended Sept. 30, 2008. The company is scheduled to report its results next week. Fallout from the November 2006 German raid has triggered criminal probes in more than 10 countries amid growing evidence that Siemens bribed customers to win big infrastructure projects abroad. Munich-based Siemens said last year it had flagged €1.3 billion in suspicious transactions in 2000 through 2006.
In a brief statement, Siemens said on Wednesday that the €1 billion provision is the "current estimate" of coming German and U.S. fines "based on the status of ongoing discussions" with authorities in the company's two biggest markets.
The U.S. Justice Department and the Securities and Exchange Commission have been probing Siemens under the Foreign Corrupt Practices Act. The costliest fine under that law to date was $44 million, levied against a subsidiary of Houston-based oil-services company Baker Hughes Inc. last year, for payments made to government officials in Kazakhstan. The DOJ and the SEC declined to comment. But a person familiar with the Washington-based talks said that Siemens is in intensive discussions with authorities and is increasingly "comfortable" about where they are headed.
Siemens also is negotiating a followup settlement with Munich prosecutors. The company agreed last year to pay German authorities a €201 million fine for bribing government officials in Nigeria, Russia and Libya to win telecommunications-equipment contracts earlier this decade.
A spokesman for Munich prosecutors confirmed new settlement talks with Siemens over alleged bribes paid by other business units. Siemens booked €72 billion in revenue in fiscal 2007 and manufactures products that range from light bulbs and Safety Glasses to steam turbines and high-speed trains.
Mr. Löscher joined Siemens in mid-2007 as part of a massive shake-up at the company, which has replaced all but one management-board member since the bribery scandal erupted.
Siemens recently said it would seek financial damages from 11 former board members for failing to spot the corruption earlier.
In addition to possible fines, Siemens has acknowledged in the past that it faces the threat of bidding bans for public-sector contracts in some of the nearly 200 countries where it is active. German authorities have sentenced one former Siemens executive and indicted two other former managers since launching their criminal probe. Prosecutors are working through a list of around 300 suspects.
