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Bribery at Siemens

DW staff (nda)July 28, 2008

In the first of a series of verdicts on bribery at Siemens, a Munich court handed a suspended two-year jail term and fine Monday, July 28 to a former executive at the German electronics and engineering group.

Former Siemens top manager Reinhard S.
Reinhard S. is the first former executive to receive a sentence in the bribery scandalImage: AP

Reinhard S., who was a senior figure in Siemens' ICN division, which builds fixed-line telephone exchanges, was convicted of 49 counts of being a party to misappropriation of corporate funds.

The case of the defendant and others revealed that some Siemens divisions were using kickbacks to officials and purchasing executives in Greece, Italy and other nations to win major contracts. Slush funds hidden in the Siemens accounts were used as a conduit for the bribery.

The defendant admitted in court that he helped create the slush funds and front companies, which were the mechanism used to pay "consultancy" fees to corrupt foreign officials who were open to bribery.

In reality, the recipients did not provide any consulting time to the front companies, but simply influenced buying decisions to favor Siemens. The defendant was not charged with paying the actual bribes.

Presiding judge Peter Noll handed him a fine of 108,000 euros ($169,000).

Siemens facing further court cases

Exterior view of a building of German Siemens company in Munich
The gloom has well and truly settled over SiemensImage: picture-alliance/dpa

Siemens has been preparing for its executives to be dragged through the courts since admitting it had found evidence of significant kickbacks in a total of six divisions in January.

Siemens had previously stressed that its division supplying telephone switching equipment was the main one that spent a total of 1.3 billion euros improperly.

Chief Financial Officer Joe Kaeser said that the total included huge, unexplained payments to "consultants" by a division supplying power-generation equipment.

Similar payments, thought to mask bribes to corrupt staff of Siemens customers, were also detected on a lesser scale in transport systems, energy distribution, medical technology and industrial services.

The scandal attached to the healthcare sector claimed the job of department chief Erich Reinhardt who resigned in April.

Shareholders refuse indemnity for management

Peter Loescher, CEO of German conglomerate Siemens
Loescher is the only executive granted indemnityImage: AP

Amid suggestions that board members may have been aware of the bribery, shareholders agreed by a 9:1 margin to not yet grant indemnity to most of the management board other than Siemens' new chief executive, Peter Loescher.

Such indemnity, normally passed as a matter of routine at German companies, protects executives from damages claims for any wrongdoing for past acts.

In a bid to find and punish the key executives behind the corrupt practices in Greece, Italy and other nations, Siemens investigators have offered an amnesty to smaller fish who reveal their role in the kickbacks.

Siemens is also the subject of a potentially damaging probe by the US Securities and Exchange Commission (SEC) by virtue of the fact that shares in the company are listed in the United States.