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  What Did Managers Know?: Corruption Charges Deepen at Siemens

What Did Managers Know? Corruption Charges Deepen at Siemens

Part 2: The Probe Widens

In part to satisfy the SEC, the majority of Siemens' former top executives have resigned. US law firm Debevoise & Plimpton, hired by Siemens in a further bid to placate the SEC, is currently probing the internal corruption charges and, according to reporting by SPIEGEL and the Süddeutsche, is expected to prepare a report in advance of the supervisory board meeting planned for the end of April. The law firm is investigating dubious payments made by Siemens in a staggering 50 to 60 different countries through a complex network of slush fund accounts and shell companies. In 2007, Debevoise & Plimpton's billings to Siemens were, according to SPIEGEL, to the tune of several hundred million dollars.

Heinz Hawreliuk, a member of the supervisory board representing workers from the IG Metall union, said further discussions about civil suits against ex-managers are expected to take place at the April meeting. He said that the board's audit committee had "repeatedly raised the issue of seeking damages -- also with regard to board members."

Initially, the investigation had centered around corruption allegations in Siemens' Coms telecommunications division, but according to Monday's SPIEGEL report, prosecutors are also investigating the company's Power Transmission and Distribution (PTD) unit, which makes equipment and cables for the energy industry. Investigators are said to have been questioning employees of that unit since August.

Central management board member Uriel Sharef has also reportedly emerged as a suspect believed to have been responsible for bribe payments in South America. However, prosecutors have refused to comment, and Sharef's attorney told SPIEGEL he was unaware of any such proceedings against his client.

Sharef rose within the company ranks to become a member of the Siemens executive board in 2000. He was responsible for the Siemens Power Generation Group (KWU), PTD and the Central and South America regions. He left that position in 2007 and now works as a consultant to Siemens.

In January, the company admitted that dubious payments had been made in a number of its business sectors, and not just Coms. At the time, the company's chief financial officer, Joe Kaeser, estimated the total extent of dubious money wirings at PTD alone to be at about €80 million for the period between 1999 and 2006.

Close Ties with Foreign Intelligence Service

The current SPIEGEL report also details Siemens' allegedly close working relationship with the German foreign intelligence service, the BND. Because the company manufactured virtually every type of high tech product, it served as the BND's virtual house supplier for technology -- providing wiretap-proof mobile phones as well as reconnaissance tools. The relationship is said to have been extremely important to the BND because it was interested in getting hold of the access codes to wiretapping systems Siemens had sold to countries all around the world, including Russia, Egypt and Oman.

The company also built telecommunications facilities in places that couldn't even be tracked by US spy satellites -- in Iran, for example. And the BND encouraged it to maintain its strong market share in Persian Gulf countries -- apparently so it could have access to better intelligence tools.

It was relationships like this that may have helped to fuel Siemens' self-confidence as a global player to grow and grow. After all, the company has 1,700 offices in close to 190 countries around the world. But it could also have resulted in over-confidence leading to overstepping the bounds of accepted practice.

Meanwhile, since this weekend, questions have emerged about Pierer's own potential ties to company corruption. The SPIEGEL report cites documents from 95-year-old Abolfath Mahvi, once a close confidant to the Shah of Iran, claiming the company agreed to make dubious payments to him totaling 266 million deutsche marks from the 1970s through 1990s for his role in helping to secure and implement contracts for Siemens to build two nuclear power plants in the Iranian city of Bushehr. Mahvi claims he was one of the first to give the Shah the idea of buying nuclear plants. The Shah's ulterior motive at the time, he claimed in the documents, was his hope of buying the technical know-how to be able to build a nuclear bomb.

The Persian businessman, who now lives in Geneva, wrote a letter to Pierer a year ago accusing him of having "orchestrated" the payment of bribes on the Bushehr project himself. He also alleges that Pierer was aware of the kickback payments Siemens managers had demanded in return from him. Finally, he alleged that Pierer came to personally deliver "commission" checks to him in Geneva in 1982. Because the alleged payments happened prior to the passage of Germany's anti-corruption laws, they are unlikely to trigger any criminal proceedings. They could, however, damage the moral standing of Pierer, who is still an honorary member of a number of boards in Germany.

dsl/spiegel

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