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  SPIEGEL Interview with Gerhard Cromme: 'We Must Guide Siemens Back to Calmer Waters'

SPIEGEL Interview with Gerhard Cromme 'We Must Guide Siemens Back to Calmer Waters'

Part 2: 'Siemens Was without a Leader'

SPIEGEL: Because you drove out Kleinfeld without having a successor at hand. Siemens was without a leader, and there was total chaos at the top.

Cromme: It wasn't chaos in the least! The operating units at Siemens are up and running and fully operational. And we didn't drive out Mr. Kleinfeld. We merely asked him to postpone the contract extension. The discussion with Mr. Reitzle was a purely hypothetical affair. Nevertheless, there had also been rumors of Mr. Kleinfeld's possible departure.

SPIEGEL: But you can't possibly be telling us that it was a success that you, as the new chairman of the supervisory board who had just taken office, lacked a CEO?

Cromme: It's certainly obvious that this was an unfortunate situation and that I would have done everything to avoid it. But what would have happened if we had ignored the attorneys' advice and extended Mr. Kleinfeld's contract? Perhaps the stock price would have gone up the next day. But how would we have looked if something had come out after three months, or six months?

SPIEGEL: The executive staff at the Siemens Group comprises about 150 managers, including central and division executive board members, as well as the heads of secondary departments. How many of them are implicated in the scandal?

Cromme: The overwhelming majority of Siemens employees have done their work successfully and in compliance with the law. But when it comes to a few senior executives, there are doubts as to whether they have lived up to their management responsibilities. Some may even have behaved in a manner contrary to their duty. Others insist that they were aware of nothing, despite the severity of the violations. I wonder which of the two is worse. Of course, there is a certain anxiety and barricade mentality within the company. But that shouldn't stop us from doing the right thing. Otherwise, Siemens could be seriously damaged.

SPIEGEL: The dimensions of the scandal are so great that many people must have been in the know. You can't exactly get rid of them all.

Cromme: We cannot and do not wish to do anything (to help) those who clearly broke the law. Others may have been moving in a gray zone and failed to react quickly enough. We would consider each case individually. There certainly will not be any witch-hunts.

SPIEGEL: At least a few members of the executive and supervisory boards are believed to have known more than others.

Cromme: The fact is that the group's anti-corruption official would present the board with current suspicious cases prior to every meeting of the supervisory board's audit committee. We now know that in at least one case, there was an executive who must have known that the members of the audit committee were either insufficiently or incorrectly informed.

SPIEGEL: Are you referring to former executive board member Thomas Ganswindt, who headed the telecommunications division?

Cromme: He knew, at any rate, that the facts were wrong. We must now determine whether anyone else knew. Some have already been investigated and, thank God, no evidence of any wrongdoing was found. I hope that the same thing will apply to the others.

SPIEGEL: Are you suggesting that executive information at the executive board's disposal was deliberately withheld?

Cromme: This was true of one executive board member. After carefully reviewing all the documents, the US law firm we hired concluded that we were not given complete information. It also confirmed that the members of the audit committee did not act correctly.

SPIEGEL: How much longer will the internal investigation last?

Cromme: It's hard to say. A similar, but significantly less extensive investigation at DaimlerChrysler has already been underway for three years. He hope that we will be able to reach a settlement with the authorities in the United States within a reasonable period of time, and that only minor cases will be investigated after that, so that things can get back to normal within the company.

SPIEGEL: According to recent estimates, the sum of questionable payments through consultancy agreements within the entire group could amount to upwards of €3 billion ($4.036 billion). How high could the fines be?

Cromme: I have absolutely no idea. But we are concerned, as already mentioned in the latest quarterly report, that the current figure of €420 million in the Information and Communications division could still be exceeded. But the reports in some publications that we will be required to pay a figure of €3 billion to €5 billion to the US exchange supervisory agency, the SEC, is completely made up.

SPIEGEL: Could Siemens be placed on a black list by US authorities and be excluded from the awarding of contracts in important countries because of the corruption scandal?

Cromme: It can't be ruled out, theoretically. On the other hand, I would not see this as the most likely scenario. In any event, we would be well advised to do everything within our power to avoid this.

SPIEGEL: You have been a member of the Siemens supervisory board for at least four years, and you have served on the audit committee since the beginning of 2005. Can you explain how the control mechanisms at Siemens could have been disabled to such a degree?

Cromme: No, but it amazes me. Perhaps one of factors is that the bribing of foreign officials was not criminally prosecuted in Germany until the late 1990s, and that it was even tax-deductible. That changed a short time later. And when Siemens decided to be listed on the US exchange in 2001, the company was voluntarily submitting to American jurisdiction, which meant that it had to play by the rules in place there.

SPIEGEL: The US attorneys hired by Siemens have demanded that Albrecht Schäfer, general counsel at Siemens for many years, who until recently managed the Compliance division, must leave the company. Why is he still there?

Cromme: We must differentiate between the American perspective and German labor law. It doesn't make any sense to act too hastily at this point and possibly end up losing an ensuing lawsuit after nine months. Our German and American attorneys are currently developing a joint proposal. Once it becomes available, the executive board will reach its decision and a recommendation will certainly follow.

SPIEGEL: Shouldn't you, as chairman of the audit committee, have noticed what was going on earlier?

Cromme: What else could I have done? At the end of each meeting I would ask everyone present, including KMPG, the auditing firm, Mr. Schäfer and the executive board: Is there anything we haven't discussed? Is there anything that has prevented you from doing your work?

SPIEGEL: And?

Cromme: No one ever approached me in this regard.

SPIEGEL: Shouldn't the executive board have reacted during the presentations? It was apparently familiar with the details of some of the things that happened.

Cromme: If Mr. Schäfer was saying exactly the same thing -- and that was the way it was reported to me -- I know today that there was a member of the board sitting at that table for whom the whole thing must have seemed like Grimm's Fairy Tales.

SPIEGEL: You assumed the role of the chief investigator at Siemens. There are those within the group who claim that you were eying the position of Heinrich von Pierer, the chairman of the supervisory board, from the very beginning.

Cromme: That's nonsense. There were discussions between our attorneys and Mr. von Pierer. It was on that basis that he said he would resign. No one pressured him.

SPIEGEL: And you weren't waiting in the sidelines for this opportunity?

Cromme: No, it was not part of my career plan at any time.

SPIEGEL: How long do you plan to stay in this job?

Cromme: I have been elected to hold the position until the next shareholders' meeting in January 2008. If the shareholders' meeting re-elects me at that point, I will certainly devote my best efforts to performing this task for several more years in order to bring Siemens back to the top.

SPIEGEL: Siemens has suffered tremendous damage to its image. Is a reasonable new beginning even possible?

Cromme: Yes, of course. Mr. Kleinfeld has already set an important course with current programs like "Fit for 2010." Siemens is the world leader in many areas. This is a good base. I am not fearful about Siemens, as long as we don't make any mistakes.

SPIEGEL: What exactly do you expect from Peter Löscher?

Cromme: That he starts out by spending three months actively listening.

SPIEGEL: To you?

Cromme: No, least of all to me. He should listen to his associates in the individual divisions and regions. They'll tell him where the shoe pinches. We must guide Siemens back into calmer waters. It's a national responsibility.

SPIEGEL: Mr. Cromme, we thank you for this interview.