Thursday, August 16, 2007

Siemens Bribery Probe Keeps Expanding

The probe into overseas bribery at Siemens A.G. seems to grow with each quarterly disclosure.  What started out as an inquiry by Italian and Swiss authorities into secret payments now seems to be engulfing a significant portion of the far-flung German company's foreign operations -- which is saying a lot because it operates in over 90 countries.  According to the latest SEC disclosure (here), the most recent quarter has revealed the following at Siemens:

  • During the third quarter of fiscal 2007, the Company continued to analyze payments under the BCAs identified at year-end of fiscal 2006 and payments under BCAs subsequently identified at Com. The Company is in the process of completing a Company-wide collection of BCAs, and is currently also conducting an analysis of BCAs and related payments at five other Groups (PG, PTD, TS, Med and I&S). The Company has recently commenced the analysis of BCAs and related payments at the remaining Groups and in selected regional companies. As a result, the Company has identified a significant increase in the total amount of BCA payments under review. The Company is currently analyzing the deductibility for tax purposes of these payments.
  • During the third quarter of fiscal 2007, the Company continued its analysis of cash and check payments at Com which may relate to BCAs, and which may also raise concerns under the FCPA and anti-corruption legislation in Germany and other countries. In the third quarter of fiscal 2007, the Company also commenced internal inquiries regarding similar cash payments at other Groups. As a result of these inquiries, which are ongoing, the Company has to date identified payments which do not relate to Com and for which limited documentation is available, including a significant volume of payments made through a bank account in Liechtenstein. The Company is currently analyzing the deductibility for tax purposes of these payments.
  • As a result of the investigations and through cooperation with the public prosecutors, the Company has become aware of additional bank accounts and cash funds at various locations that were not recorded in the Company’s balance sheet. The Company is currently investigating the origin and ownership of the assets contained in these bank accounts and cash funds.

Finding more accounts used to pay bribes is not a positive development, to be sure.  Siemens disclosed earlier that the Department of Justice is conducting a criminal investigation, and recently the SEC bumped up its inquiry to a formal investigation, which means it can issue subpoenas rather than rely on voluntary cooperation. 

What could make things all the more dangerous for the company is a report in the Wall Street Journal (here) that some foreign units have not been cooperative with Debevoise & Plimpton, which is conducting the internal investigation of the bribery.  A hint of non-cooperation is sure to put prosecutors on edge, and will likely drag out the investigation further because it will be difficult to verify that all the corrupt payments have been properly accounted for by the company.  If Siemens' new CEO, Peter Löscher, had hoped to resolve the investigations quickly, his desire will not be fulfilled.  The question for Siemens is how many more shoes will drop, and whether one of them will be by a prosecutor in Europe or the United States. (ph)

FCPA, Investigations | Permalink

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