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Siemens' 'passport affair'

Dirk Kaufmann, Christian Ignatzi / cdSeptember 6, 2013

The trial against Uriel Sharef, a former board member at Siemens, includes "particularly serious" breaches of trust and abetment. While it might end a decade-long affair, it has not ended corruption at the company.

The white corner of a building juts out into the sky, with the word 'Siemens' written upon it in blue (Photo: Andreas Gebert / dpa)
Image: picture-alliance/dpa

In 2003, a subsidiary of Siemens was accused of bribing an Argentine government official in order to receive a large contract in that country. The contract in question had to do with the production of non-forgeable passports for Argentines - new documents, in other words, for 40 million citizens. According to indictment papers, Siemens is said to have paid approximately $9.5 million (7.24 million euros) in bribes to win that contract.

A middle-aged man wearing black suit and a purple tie looks off camera as he speaks (Photo: Andreas Solaro / AFP)
Uriel Sharef's lawyer calls the claims "unfounded"Image: Getty Images/Afp/Andreas Solaro

The Argentine "passport affair," as it became known in Germany, is supposed to have pulled many into its net: Argentine ministers and cabinet members are said to be among them.

Even former Argentine President Carlos Menem is supposed to have received money to help Siemens win the billion-dollar contract.

Corrupt culture

Leading up to the "passport affair," a culture of corruption had developed at Europe's largest technology company.

"It was certainly the case that Siemens had a slush-fund system over the course of many years," said Hans Leyendecker, one of Germany's most renowned investigative journalist and a reporter on the Siemens "passport affair."

"Employees who were caught were transferred at times, and at other times even promoted," he told DW.

A long list of Siemens managers are said to have secured contracts through bribes.

Two years ago, Thomas Ganswindt, another former board member, also stood trial. He was accused of having utilized slush funds on behalf of his employer. The judge determined the defendant's personal guilt to be limited to such an extent that a plea bargain was agreed upon in May 2011. Ganswindt paid a fine of 175,000 euros.

A lifeless gray building of approximately six stories rises into the air above a street. (Photo: Marc Müller / DPA)
At the Munich district court: Sharef should expect the trial to take 18 daysImage: picture-alliance/dpa

Things were more expensive for Siemens. The corruption affair, discovered in 2006, cost the Munich- and Berlin-based company 2.9 billion euros - largely in fines, court fees and additional tax payments. Siemens is supposed to have illegally used 1.3 billion euros to obtain lucrative contracts, making it the largest bribery scandal in Germany's economic history.

Learning from mistakes?

Siemens does seem to have taken some lessons to heart, says Christian Humborg, the director of Transparency International in Germany.

"We have the impression that Siemens enacted a large-scale clean-up, and that some things have changed within the company," he told DW. While the company's reputation can't be polished clean, the firm of 400,000-plus is no longer considered a "poster-child for corruption in Germany."

Journalist Hans Leyendecker also sees new policies within the company. "When under-the-table funds are demanded for foreign contracts, Siemens doesn't do business," he said. The company, he says, now has a zero-tolerance policy. "Whoever takes slush funds is gone."

Workers wearing bright yellow jackets and construction hardhats enter the circular opening of a nuclear reactor. (Photo: Jussi Nukari)
Siemens builds and installs anything from trains to consumer appliances to this steamer at a reactor in FinlandImage: picture-alliance/Lehtikuva

Yet negative headlines continue to trail the engineering firm. During the construction of a subway line in Brazil's largest city of São Paulo, prices are said to have been fixed by a cartel formed by international firms, Siemens among them.

Though the company has signaled its readiness to cooperate with authorities, it may only have to do so on one side of the Atlantic. In Germany, legal disputes pertaining to cartels are constrained by a "principle witness" law, giving the company hope for avoiding a fine.

The state of São Paulo, however, has already announced its intent to file a criminal case against Siemens, potentially adding another scratch to the newly-polished image of the embattled German firm.

Not guilty

Uriel Sharef's trial is expected to last 18 days. The most important thing, however, is that it is conducted to completion, says the director of Transparency International in Germany.

"Only in court, when witnesses are named, can the corruption case be unwound effectively," Humborg said.

A man wearing glasses and sporting a beard looks off camera as he speaks before a blue background. (Photo: Robert Schlesinger / dpa)
Its faults notwithstanding, Humborg at Transparency International believes Siemens is changingImage: picture-alliance/dpa

Stopping the trial in exchange for a plea bargain, as in the case of Thomas Ganswindt, he added, would leave many issues in the dark.

Standing alongside Uriel Sharef is another former board member. When that trial finishes, it could be the final word on the Argentine "passport affair."

For the defense, the outcome of the proceedings is clear. Sharef's lawyer considers the accusations against his client unfounded. He is operating under the assumption that the trial will end in a not-guilty verdict, he said.