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At Siemens, Who Knew What?

German news magazine Spiegel posted a story online on April 12, 2008 (here) alleging that Siemens' former chairman Heinrich von Pierer and its executive board members may have been aware of "systematic corruption at the German multinational firm as far back as 2004."

Spiegel describes previously unreleased internal memos written by Siemens' former head of compliance, Albrecht Schäfer. The memos, Spiegel says, "could become a smoking gun in the case." The story claims that as recently as last year, Siemens' internal investigators showed no interest in the potentially important evidence. If true, the revelations could cast doubts on the integrity of the company's efforts to uncover and self disclose to U.S. authorities the full extent of its past corrupt practices and management's knowledge about them.

Compliance chief Schäfer apparently wrote the memos in 2004. His purpose was to inform Mr. Pierer and other members of Siemens's executive board about a prosecution in Milan. That case has involve allegations that Siemens paid bribes to sell turbines to the energy utility company Enel. In an April 29, 2004 memo, Mr. Schäfer even warned about the danger that U.S authorities might become involved as a result of the Enel case. Both the U.S. Department of Justice and the Securities Exchange Commission are today investigating Siemens for possible violations of the Foreign Corrupt Practices Act.

Spiegel says the "new memos first emerged at Siemens in recent days. According to the former compliance chief's attorney, her client already offered to share what he knew with internal Siemens investigators at the start of 2007. However, she claims the company had 'no interest in his testimony' during the first half of the year. She says they 'either weren't taken seriously or people just didn't want to hear' what he had to say. She claims a Siemens attorney rebuffed his effort to provide information." Siemens itself has not commented on Spiegel's story.

In October 2007, Siemens settled global corruption charges with Munich prosecutors for ?201 million. The settlement was based on questionable payments of ?420 million. But since then the company has identified ?1.3 billion in potentially illegal payments to public officials around the world. The company is also facing possible charges of public corruption in Italy, China, Hungary, Indonesia, Greece and Norway. The scandal forced the resignations of Siemens' ceo Klaus Kleinfeld and chairman Pierer, among other executives and managers.

Assuming Spiegel's story is accurate, it may create fresh obstacles for Siemens. The company has said it's anxious to reach a deal with the DOJ and SEC, and its internal investigation is intended to support that effort. But four-year-old memos from compliance chief Schäfer to the company's former chairman and members of the executive committee about corruption allegations -- and charges that as recently as last year Siemens' internal investigators weren't interested in the memos -- won't help Siemens' convince anyone that it's finally coming clean.

Full post as published by The FCPA Blog on April 13, 2008 (boomark / email).