Dragging Their Heels Siemens Managers 'Refusing to Help' with Corruption Investigation

A US law firm hired by Siemens to investigate corruption in the company is complaining that managers are hampering its investigation, according to media reports. Siemens could face massive fines in the US and be banned from competing for public tenders if executives don't start playing ball.

New Siemens CEO Peter Löscher is charged with cleaning up the company's act.

New Siemens CEO Peter Löscher is charged with cleaning up the company's act.

Siemens' efforts to clean out the skeletons in its corporate closet, after a series of revelations about corruption in the company, are laudable. But they only work if the people under investigation want to play along. And, at least according to media reports Friday, they don't.

With an eye to rescuing its flawed image, the German engineering giant hired American law firm Debevoise & Plimpton at the end of 2006 to investigate the entire company for bribery and other possible forms of corruption. But several papers have reported that the elite law firm is now complaining that Siemens managers are refusing to cooperate with the investigation.

Quoting sources on the Siemens supervisory board, the German dailies Süddeutsche Zeitung and Frankfurter Allgemeine Zeitung, said Friday that the New York-based law firm had complained to the supervisory board about lack of cooperation from managers in several countries. Managers have apparently been claiming that they did not have time for the planned interviews with Debevoise and were refusing to let lawyers examine files.

According to sources on the supervisory board, Debevoise lawyers had named individual countries in which the investigation was being hindered at a board meeting on Wednesday. In Europe, these included Austria, Greece and Belgium. Siemens operations in Africa and Asia were also named. A board member said it was particularly disconcerting that management in Austria and Greece were refusing to cooperate, as Siemens offices in both countries were "hubs" for alleged corruption.

The supervisory board was reportedly shocked by the allegations. Sources on the board said that executives in several of Siemens' foreign subsidiaries had clearly not recognized how serious the situation was.

The sources said that the head of the supervisory board, Gerhard Cromme, insisted he would not take such behavior lying down and planned to crack down. Cromme told DER SPIEGEL in a recent interview that he wanted to "guide Siemens back to calmer waters."

The company's new CEO Peter Löscher, an outsider installed to help Siemens make a break with its grubby past, is reported to be charged with the task of breaking down resistance against the investigation and making sure that the scandal is cleared up as quickly as possible. Both Cromme and Löscher have repeatedly said that they are interested in "complete transparency."

By hiring Debevoise & Plimpton, which is regarded as one of the top US law firms, Siemens wanted to demonstrate that it was able to clear up the corruption offenses by itself -- and try if possible to limit the involvement of the Securities and Exchange Commission (SEC), which regulates US stock markets, and the US Department of Justice. "If Debevoise does not make progress, then the SEC and the US Department of Justice will send American public prosecutors into our offices," one of the members of the supervisory board told the Süddeutsche. The Debevoise investigators are keeping the SEC informed about their findings. Siemens is listed on the New York Stock Exchange and hence has to comply with SEC rules.

In a worst case scenario, Siemens could be banned from competing for public tenders in the US -- which would also make it difficult to get any more contracts from private companies. The SEC could impose drastic punishments on Siemens if the work of Debevoise continues to be blocked, such as fines in the region of several billion euros.

Meanwhile the ongoing bribery scandal appears to be expanding. Despite the lack of cooperation, Debevoise is reported to have come across slush funds in Siemen's power generating division. According to sources on the supervisory board, the American lawyers had discovered bank accounts in Liechtenstein where more than €100 million had been channeled. Until now, slush fund accounts of that size had only been reported in the former telecommunications division.

And according to a report Friday in the Financial Times Deutschland, the company is investigating payments which are much larger than previously thought.

In announcing its quarterly figures, Siemens said that the volume of suspicious payments was "significantly above the value of the payments which were being investigated at the end of the 2006 business year." Up until now Siemens had admitted to bribery payments totally €420 million ($570 million).



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