As posted by: Wall Street JournalFRANKFURT -- German engineering company Siemens AG and U.S. authorities are expected to settle a longstanding bribes-for-business investigation Monday with a record $800 million fine -- almost 20 times higher than the largest previous penalty under the U.S. Foreign Corrupt Practices Act.
Documents filed with a U.S. court Friday by the U.S. Justice Department and the Securities and Exchange Commission allege corruption reaching the top echelons of Siemens management. The conglomerate allegedly spent more than $1 billion bribing government officials around the globe -- including former Argentine President Carlos Menem -- to win infrastructure contracts in recent years.
A Siemens building in Munich
The detailed claims of wrongdoing could trigger more fines and arrests in other parts of the world for Munich-based Siemens, people familiar with the matter said. Siemens, which makes everything from wind turbines to high-speed trains, is being investigated for corruption in at least 10 other countries. German authorities could announce a separate fine of several hundred million dollars as early as Monday in a parallel probe, said people familiar with the matter.
At the same time, the U.S. court documents state that Siemens, Europe's largest engineering company by revenue, took aggressive steps to ferret out corruption after the bribery scandal erupted in late 2006. The recent steps, which the Justice Department described as "extraordinary" in a court filing, factored into the Justice Department's decision to not press for a fine as high as $2.7 billion, according to the Justice Department's sentencing memorandum.
U.S. authorities have used a carrot-and-stick approach by rewarding remedial action as they ramp up prosecutions under FCPA, enacted in 1977 to clamp down on overseas bribery. The proposed settlement nonetheless dwarfs the largest previous FCPA fine of $44 million, levied last year against a subsidiary of Houston-based oil-services company Baker Hughes Inc. for $4 million in alleged bribes paid to government officials in Kazakhstan.
Under the accord between Siemens and the Justice Department and SEC, the company will admit inadequate internal controls and doctoring its books. But it won't formally plead guilty to bribery charges. That will allow it to keep bidding for public-sector infrastructure projects in the U.S., according to people familiar with the matter.
A Siemens spokesman confirmed the company is close to a settlement with U.S. authorities.
The federal U.S. District Court for the District of Columbia is scheduled to rule on the plea bargain at a Monday hearing. If the court approves the settlement, Siemens would pay a criminal fine of $450 million to the Justice Department and $350 million in civil damages to the SEC. The company also would have a U.S.-approved external compliance monitor for as many as four years.
The SEC claims Siemens made at least 4,283 bribe payments totaling $1.4 billion alone between March 2001 and September 2007. Misconduct was "systematic" and involved "employees at all levels of the company, including former senior management," the SEC said in a court filing.
The filing details alleged bribes to government officials in 10 countries, including payments to supply transit systems in Venezuela; medical equipment in China, Vietnam and Russia; power equipment in Iraq and Israel; refineries in Mexico; and telecommunications equipment in Nigeria and Bangladesh.
It accuses Siemens of paying more than $40 million in bribes to senior government officials in Argentina between 1998 and 2004 to try to secure a contract to make national identification cards. Illicit payments included "at least $2.6 million" in 1998 and 1999 to Mr. Menem, who was Argentina's president at the time, and two other senior government officials, according to the SEC filing. Mr. Menem has in the past denied illegal payments from Siemens.
U.S. prosecutors claim Siemens employed several methods to conceal bribes, including sham consulting contracts. The Justice Department also claims that Siemens used "removable Post-It notes" with affixed signatures to obscure audit trails and "cash desks" where employees could fill "empty suitcases" with as much as €1 million ($1.3 million) to pay bribes.
The SEC filing alleges that Siemens's management board ignored and suppressed frequent "red flags." It accuses the company's former chief financial officer, Heinz-Joachim Neubürger, of taking insufficient action in 2003 after auditors flagged suspicious payments in Nigeria and of misleading the company's nonexecutive supervisory board on other compliance matters.
Mr. Neubürger left Siemens in 2006 and has denied any wrongdoing. He and at least two other former management-board members remain criminal suspects in a continuing bribes-for-business probe by German prosecutors, according to people familiar with the matter. Prosecutors are working through a list of about 300 suspects and more indictments are expected after German courts recently handed out suspended prison terms to three former managers.
Siemens paid a €201 million fine to German authorities last year and didn't contest the charges after a court ruled the company had paid €12 million in bribes to government officials in Nigeria, Russia and Libya to win telecom-equipment contracts. A follow-up settlement with German authorities, expected to be announced in the coming days, involves alleged bribes at other business units.
U.S. prosecutors will argue for some leniency at Monday's court hearing in Washington. They will highlight how Siemens has replaced all but one management-board member and hired hundreds of compliance officers after a dawn raid by German police in November 2006.
The Justice Department said Siemens also took "aggressive steps" to preserve evidence after the raid and has shared more than 100,000 pages of documents with U.S. authorities. "The reorganization and remediation efforts have been extraordinary," the Justice Department added in a court filing.
Amid the scandal, Siemens has paid more than €850 million to external consultants since late 2006 -- including more than €200 million to the U.S. law firm Debevoise & Plimpton LLP, which investigated corruption allegations and regularly reported its findings to the Justice Department and SEC.
The German company also said earlier this year it would launch civil proceedings that seek financial damages from 11 former management-board members for failed oversight earlier this decade. The targeted individuals under investigation for negligence and failed oversight include former chief executives Heinrich von Pierer and Klaus Kleinfeld, both of whom have denied any wrongdoing.
