8 Former Siemens Execs & Agents to Pay $448M for FCPA Violations

(In a parallel civil action, the Securities and Exchange Commission (SEC) has announced charges against Siemens executives and agents. Related SEC press release is available here.)

Charged with Conspiracy to Violate FCPA Anti-Bribery & Other Provisions

The indictment charges the defendants with conspiracy to violate the anti-bribery, books and records and internal control provisions of the FCPA; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud.

The defendants charged in the indictment include: (1) Uriel Sharef, a former member of the central executive committee of Siemens AG; (2) Herbert Steffen, a former CEO of Siemens Argentina; (3) Andres Truppel, a former CFO of Siemens Argentina; (4) Ulrich Bock, (5) Stephan Signer, and (6) Eberhard Reichert, former senior executives of Siemens Business Services (SBS); and (7) Carlos Sergi, and (8) Miguel Czysch, who served as intermediaries and agents of Siemens in the bribe scheme.

Siemens Paid Nearly $100M in Bribes to Argentine Officials to Get $1B Project

According to the indictment, in 1994, the government of Argentina issued a tender for bids to replace an existing system of manually created national identity booklets with state of the art national identity cards -- called the DNI project. The value of this project was $1 billion and in 1998, the Argentine government awarded the project to a special-purpose subsidiary of Siemens AG.

The indictment alleges that during the bidding and implementation phases of the project, the defendants and their co-conspirators caused Siemens to commit to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party and candidates for office who were likely to come to power during the performance of the project.

Concealed Bribes Thru Intermediaries, Recorded as Consulting Contracts, Etc.

Members of the conspiracy allegedly worked to conceal the illicit payments through various means. For instance, Bock made cash withdrawals from Siemens AG general-purpose accounts in Germany totaling approximately $10 million, transported the cash across the border into Switzerland and deposited the funds into Swiss bank accounts for transfer to officials.

Bock, Truppel, Reichert and other conspirators also allegedly caused Siemens to wire transfer more than $7 million in bribes to a bank account in New York disguised as a foreign exchange hedging contract relating to the DNI project. Over the duration of the conspiracy, the conspirators allegedly relied on at least 17 off-shore shell companies associated with Sergi, Czysch and other intermediaries to disguise and launder the funds, often documenting the payments through fake consulting contracts.

Paid More Bribes When New Gov't Took Power After 1999 Presidential Election

In 1999, according to the indictment, the Argentine government suspended the DNI project, due in part to instability in the local economy and an impending presidential election. When a new government took power in Argentina, and in the hopes of getting the DNI project resumed, members of the conspiracy allegedly committed Siemens to paying additional bribes to the incoming officials and to satisfying existing obligations to officials of the outgoing administration, many of whom remained in influential positions within the government.

Filed $500M Fraudulent Arbitration Claim When Project Was Terminated in 2001

When the DNI project was terminated in 2001, members of the conspiracy allegedly responded with a multi-faceted strategy to overcome the termination. The conspirators allegedly sought to recover the anticipated proceeds of the DNI project, notwithstanding the termination, by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. The claim alleged wrongful termination of the contract for the DNI project and demanded nearly $500 million in lost profits and expenses. Members of the conspiracy allegedly caused Siemens to actively hide from the tribunal the fact that the contract for the DNI project had been secured by means of bribery and corruption, including tampered witness statements and pleadings that falsely denied the existence of corruption.

Siemen's corrupt procurement of the DNI project was not exposed during the lifespan of the conspiracy and in 2007, the arbitral tribunal awarded Siemens nearly $220 million on its DNI claims, plus interest. In 2009, new management of Siemens caused Siemens AG to forgo its right to receive the award and, as a result, the company never claimed the award money.

Siemens & Its Subsidiaries Disclosed Potential FCPA Violations to DOJ

DOJ states that these charges follow, in large part, Siemens AG and its subsidiaries' disclosure of potential FCPA violations to DOJ. Siemens and its subsidiaries initiated an internal FCPA investigation; shared the results of that investigation; cooperated extensively and authentically with DOJ in its ongoing investigation; and took remedial action, including the complete restructuring of Siemens AG and the implementation of a sophisticated compliance program and organization.

Siemens & Subsidiary Agreed to Pay $448M and $500K in Fines

These charges follow the 2008 guilty pleas by Siemens AG and its subsidiary, Siemens S.A. (Siemens Argentina), to criminal violations of the FCPA. As part of the plea agreement, Siemens AG and Siemens Argentina agreed to pay fines of $448.5 million and $500,000, respectively.

(See ITT's Online Archives 08122999 #2 for summary of Siemens AG and three of its subsidiaries' guilty pleas to FCPA violations in which Siemens agreed to pay a $450 million criminal fine.)