Siemens agrees to pay $1.3B in bribery settlement

By: AP
By: AP

FRANKFURT, GermanySiemens AG — rocked by a series of corruption cases that has cost the company both prestige and money — agreed Monday to pay more than $1 billion in fines in Germany and the U.S. as it moved a step forward in closing a dark chapter in its history.

Munich-based Siemens agreed to pay more than $800 million in fines to settle long-standing corruption charges in the United States and another 395 million euros ($533.6 million) to European authorities. The announcements of the amounts of both fines came Monday.

Siemens, which makes products ranging from wind turbines to trams, has been embroiled in a far-reaching corruption scandal and has acknowledged making dubious payments to secure business. An investigation commissioned by Siemens found evidence of violations across the company, and in several countries.

In July, Siemens said it planned to sue two former chief executives and nine other former executives for alleged supervisory failings in the corruption scandal, which has cost the company many millions in fines and damaged its reputation.

In Washington on Monday, U.S. District Judge Richard Leon accepted guilty pleas from lawyers for the conglomerate — Germany's biggest engineering company — in federal court in Washington D.C.

Under the terms in the U.S., Siemens and three of its international subsidiaries will pay approximately $450 million to the U.S. Justice Department to settle charges of making bribes and trying to falsify corporate books from 2001 to 2007. It will pay another $350 million to settle charges from the U.S. Securities and Exchange Commission.

The company is listed on the New York Stock Exchange and Germany's DAX.

U.S. prosecutors described schemes during which Siemens executives bribed foreign officials with suitcases stuffed with money and created vast slush funds to win government contracts. Though the company agreed to settle the case by paying in fines and penalties, acting Assistant Attorney General Matthew Friedrich left open the possibility that the executives themselves could face future charges.

"Today's filings make clear that for its business operations overseas, bribery was nothing less than the standard operating procedure for Siemens," Friedrich said at a Justice Department news conference in Washington.

He added: "Corruption is not a victimless offense. Corruption is not a gentleman's agreement where no one gets hurt. People do get hurt. And the people who get hurt the worst are often residents of the poorest countries on the face of the earth."

Siemens said it will pay for an independent compliance monitor who will report to the Justice Department on the company's actions. Former German Finance Minister Theo Waigel will serve in that position, Siemens said in a statement.

The Justice Department called the charges against Siemens "further reaching in scope and magnitude" than any other case it had seen under the Foreign Corrupt Practices Act. But prosecutor Laurie Weinstein told Leon the company had cooperated with the investigation, including "helping investigate itself and unaffiliated third parties."

As part of the plea deal, Siemens will still be considered a "responsible contractor," and can still bid for government contracts.

Leon said he was "more than satisfied" with the plea agreement.

"This court believes this is a responsible and fair disposition of this case," Leon said.

In Munich, German prosecutors said they would fine the company 395 million euros for a "lack of control over its business activities," which a market regulatory filing late Monday said Siemens had accepted. Other investigations into former executives and managers in connection with the scandal continue, the announcement said.

The announcements were widely expected and Siemens announced earlier this year that it was setting aside approximately 1 billion euros to be booked in the last quarter of its September-ended 2008 fiscal year for any settlements.

The global economic downturn and the corruption scandal have both had negative effects on the company, with the shares trading at 47.15 euros, more than 55 percent of their 52-week high of 109.89 euros, set little more than a year ago.

Still, analysts said putting an end to the corruption issues surrounding the company should be good for the company. UniCredit Monday reiterated its "Buy" rating on the stock.


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