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GERMANY: Ex-Manager Tells of Bribery at Siemens

by CARTER DOUGHERTYThe New York Times
May 27th, 2008

FRANKFURT — A former manager of Siemens, the European engineering company, testified Monday about an intricate system of slush funds and bribery at the company as the first trial on allegations of corporate corruption in Germany began.

Reinhard Siekaczek, a former manager at Siemens, testified about his role in a system of bribery.

Since the wide-ranging investigation came to light in 2006, the Siemens name has been badly tarnished, two top executives lost their jobs, and the company might still face billions of euros in fines and indictments of still-serving executives

Reinhard Siekaczek, who is facing charges of breach of trust, told the court that his role as a steward of off-the-books accounts, which were used to pay bribes, was an open secret within the mobile telephony division where he once worked.

Mr. Siekaczek described how managers carefully signed Post-it notes that had been affixed to potentially incriminating documents so that they might later peel away evidence of their imprimatur if necessary.

“In this way, the signatories could elegantly remove signs of their involvement if it came to an investigation,” Mr. Siekaczek said.

He directly implicated a series of supervisors in the division where he worked through 2004 and which has since been folded into a joint venture that Siemens created with Nokia, the Finnish mobile phone company.

But blockbuster revelations at the trial will probably center on what more senior Siemens officials knew.

German prosecutors are also hoping that the trial will catalyze a long-delayed process of convincing corporate Germany of the need to root out practices once considered acceptable, especially in big infrastructure projects, a Siemens specialty.

“This trial is going to create a new sensibility in Germany,” said Anton Winkler, a senior prosecutor in Munich. “Not only this trial but the entire Siemens investigation. The message has arrived in all German companies.”

To underscore their seriousness, Mr. Winkler said further indictments among the 300 people linked to the Siemens investigation would come soon.

Prosecutors are still combing through the 5 terabytes of electronic data, or roughly five million pages, that they have confiscated, in addition to enormous amounts of printed material, he said.

Mr. Siekaczek, 57, has told prosecutors that Joe Kaeser, now Siemens’s chief financial officer and then finance chief for the mobile business, knew about the bribery. Siemens has steadfastly defended Mr. Kaeser against any implication of wrongdoing. Prosecutors say he will probably appear as a witness at the current trial.

The trial will probably also bring Heinrich von Pierer, a former chief executive and chairman of Siemens, to the witness stand, as well as other former Siemens officials.

Prosecutors recently said they would charge Mr. von Pierer, who resigned as chairman last year over the scandal, with failing to effectively supervise, a noncriminal charge that carries only a fine. But they also are not ruling out the possibility of a more serious indictment if evidence points to him.

Mr. Siekaczek was charged with 58 counts of breach of trust, and he could face a prison sentence if found guilty. But his extensive cooperation with prosecutors is expected to lighten his sentence.

A verdict is expected by August.

German prosecutors revealed their investigation in late 2006 with a series of raids on company offices. That investigation helped to kick off or accelerate similar inquiries in a dozen different countries, including the United States, Greece, Liechtenstein, Italy and Austria.

Siemens, which makes products ranging from power generators to medical devices to light bulbs, has since embarked on a housecleaning that has drawn widespread praise from independent experts. Along with Mr. von Pierer, the scandal prompted the then-chief executive, Klaus Kleinfeld, to leave.

Siemens has hired its own legal and financial investigators, who have identified 1.3 billion euros ($2.1 billion) in suspicious payments that may have been used to win contracts around the world.

Siemens also hired Michael Hershman, a co-founder of the prominent watchdog group Transparency International, to fashion a system for training employees in compliance with anticorruption laws.

“To be fair, Siemens is setting a pretty good example that other companies could learn from,” said Mark Pieth, a professor of criminology at the University of Basel and the head of antibribery efforts at the Organization for Economic Cooperation and Development, based in Paris.

In his testimony, Mr. Siekaczek painted a picture of a system in which Siemens employees, himself foremost among them, paid for nonexistent consultant services and then channeled the money into off-the-books slush funds. The money was then used to pay bribes to secure orders for major Siemens projects.

The system was difficult to shut down quickly after Germany criminalized bribery of foreign officials in 1998, since payments had been promised over longer periods, Mr. Siekaczek said.





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