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Corruption Allegations Tarnish Siemens' Good Name
[February 05, 2007]

Corruption Allegations Tarnish Siemens' Good Name


TMCnet Contributing Editor
 
Siemens (News - Alert) AG, the German multinational, is a well-known name among electrical engineering and electronics companies globally.


 
With its headquarters in Berlin and Munich, the company offers in depth knowledge about various inventive technologies to its vast clientele spread over 190 countries. Established 150 years ago, the company is a frontrunner in the fields of information and communications, automation and control, power, transportation, medical, and lighting.

 
It is not often that an industrial conglomerate of this stature has to face allegations and inquires from the U.S. Department of Justice (DoJ) and Securities and Exchange Commission (SEC) on account of corruption. With investigations spreading all across the United States, the company seems to have landed in serious trouble.
 
Siemens recently posted a first quarter (2007) financial report on its Web site. A public statement issued by the company noted that “The U.S. Department of Justice is conducting an investigation of possible criminal violations of U.S. law by Siemens in connection with these matters.”
 
In addition, German law officials are probing into a case involving Siemens and 200 million euros ($260 million). The allegation is that the money was withdrawn from the Siemens’ accounts and moved into foreign accounts, where it was used to pay bribes in order to gain hefty telecommunication contracts.
 
An in-house inquiry is also underway at Siemens. It is expected that dubious payments worth 420 million euros were paid as consultancy fees for a period of seven years.
 
The revelation has shocked the global shares market and has done some serious harm to Siemens stocks, which fell by 0.6 percent to close at 84.65 euros by 0855 GMT on February 2, 2007.
 
The company stated that their business is certainly being affected by the ongoing inquiries and that no provisions had been made for any likely future consequences or penalties that might arise.
 
The latest statements issued by Siemens reads in part: “The Company’s operating activities may also be negatively affected due to imposed penalties, compensatory damages or due to the exclusion from public procurement contracts. No charges or provisions for any such penalties or damages have been accrued as management does not yet have enough information to reasonably estimate such amounts.”
 
As the news of alleged corruption at Siemens spread worldwide, several countries started carrying out related investigations into the company’s operations within their frontiers. Law officials in Greece performed inquiries relating to one of the company’s former officers residing there; they also questioned the company’s chief executive.
 
Similar inquiries have resulted in other countries, such as Liechtenstein and Switzerland.
 
Standing by the company’s operational transparency, Siemens CEO Klaus Kleinfeld in the first quarterly Annual Shareholders’ Meeting 2007 said, “We want to become a company that is an international worldwide benchmark for high standards of transparency and control.”
 
Addressing Siemens shareholders, Kleinfeld emphasized that the company would not tolerate any illegal business procedures within its structure and the matter would be deeply looked into. According to him the managing board will take all the necessary steps to steer clear of this matter.
 
In order to emerge clean from the current financial and legal chaos, Siemens is undertaking the following measures: 
  • A detailed autonomous investigation, under the guidance of the international law firm Debevoise & Plimpton. The audit committee has appointed this investigation.
  • The globally renowned expert Michael J. Hershman has been hired as the company’s compliance consultant.
  • Daniel Noa, a veteran public prosecutor has been appointed as Siemens’ Chief Compliance Officer.
  • With a view to improvise the internal compliance and control systems, Siemens is undertaking all possible rectification measures.
  • Gerhard Cromme, Chairman of the Audit Committee in the Supervisory Board said, “I am confident that the trust in Siemens and the company’s good reputation will be restored.”
 Till the investigations are fully completed, Siemens might just have to play a wait and watch game.
 
Rahul Prabhakar is a contributing editor for TMCnet. To see more of his articles, please visit his columnist page.
 
 

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