German engineering giant Siemens is expected to accept a settlement with the United States in a corruption and bribery scandal that would see it paying fines of about €600 million ($800 million). Under the deal, the company would pay around $450 million to the US Justice Department and $350 million to the stock market regulator Securities and Exchange Commission (SEC).
The fines are far lower than those initially anticipated by the company, which has been embroiled in an international bribes-for-contracts scandal since 2006. The company is expected to accept the settlement during court negotiations in Washington on Monday.
A Siemens spokesperson would not answer journalists' questions about the case, but said the SEC and Justice Department investigation of Siemens was "close to reaching a conclusion." The company's board was expected to meet on Monday to discuss the new developments.
Siemens has been listed by the New York Stock Exchange since 2001 and is required to observe American securities laws, which include harsh penalties for companies caught issuing bribes. US officials investigated the company for suspected widespread violations of the 1977 Foreign Corrupt Practices Law. Germany also passed similar legislation in 1999 making it illegal for companies to bribe in order to win contracts abroad, and in the last two years the Siemens case has been symbolic of a major effort here to clean up the international dealings of German multinationals.
Siemens workers have admitted to having issued kickbacks to so-called consultants who provided no services in return for their payments. Many of the payments are believed to have been bribes made in order to land lucrative international contracts. The corruption case has been described as the greatest ever in German corporate history.
In order to prepare to pay massive fines in the US and Germany, the country had set aside €1 billion. After the US settlement, the company will still have €400 million available to pay any future fine imposed by German officials. Currently, the Munich Public Prosecutor has issued proceedings against the company for bribes and slush funds in five different divisions. A report in Monday's Süddeutsche Zeitung claims the company believes justice officials in the southern German state of Bavaria will impose fines of between €300 million and €400 million. The company, however, remains under investigation for corruption in at least 10 other countries and could face additional fines.
The US could have sought fines as high as $2.7 billion, but one court filing described Siemens' efforts to stamp out internal corruption after the scandal came to light in 2006 as "extraordinary." Indeed, the scandal has already cost the company €2.5 billion. Under pressure from the SEC, the company underwent an expensive internal investigation, bringing in external lawyers and auditors. The company was also forced to pay back taxes for payments made that were entered into the books falsely and then directed into off-book accounts. A Munich administrative court has already imposed fines of over €201 million on the company's former telecommunications division.
An "Extraordinary" Internal Clean-Up Effort
The company has admitted that between 1999 and 2006 as much as €1.3 billion was spent on dubious payments. The US Justice Department and SEC claim that between 2001 and 2007, a total of 4,283 illegal payments were made to the tune of €1.1 billion. US officials also allege that former Siemens CEO Heinrich von Pierer, who stepped down from his position as a result of the scandal, had already been aware in 2001 of Swiss trust accounts that were used to make the bribery payments abroad. By 2004, they claim, he also knew about the slush funds.
Pierer, as well as his successor Klaus Kleinfeld and four other members of the board -- as well as the company's entire former board as an entity -- have all been accused on not following up on "red flags" that strongly pointed to corrupt practices and not doing enough to stop blatant violations of the law, according to the Süddeutsche. US officials even go so far as to describe the efforts as a "cover-up." The documents also allege that former Chief Financial Officer Heinz-Joachim Neubürger of having falsely informing his company board's audit committee in 2005. Neubürger allegedly denied having any knowledge of the existence of accounts outside of Siemens.
According to the Süddeutsche, US investigators have concluded that Pierer created a business atmosphere that not only tolerated corruption, but also rewarded it at the highest levels of the company. Sources at Siemens told the Munich-based newspaper there would be little surprise if US officials also were to launch investigations into Pierer and other former board members.
Both Pierer and Kleinfeld have repeatedly denied allegations they knew about the bribes and corruption and have proclaimed their innocence.