Tuesday, December 16, 2008

More on Siemens

Initially discussed here, the Siemens plea is an interesting one. The go-to place for information on this case is the FCPA Blog here. Some observations -

  • Unlike many cases involving a company, this does not appear to be a deferred prosecution agreement - but rather is a plea agreement with specified terms.
  • The fine is huge, but it allows the company to resolve the case and move forward and the plea is not to an anti-bribery act, but rather the reporting provisions.
  • The timing on this resolution is interesting - before the new administration takes over, before the end of the year - or is that reading too much into this.
  • Unlike the deferred prosecution agreement in KPMG (here -p. 26) there is no explicit statement in the agreement precluding debarment. Also in Titan (FCPA case) there was a statement by the company that spoke to there being no debarment. One can find a reference to that here:

"Titan announced that it had reached a settlement to avoid debarment from work on U.S. government contracts. Avoiding debarment was particularly important to Titan, which is a leading provider of information and communications systems to U.S. government agencies."

But here again, we are only discussing reporting provisions and not anti-bribery.  And certainly no one should want to hurt innocent people associated with the company.

  • At the government press conference it was stated - "Siemens' cooperation, in a word, has been exceptional.   Siemens has faced facts, accepted responsibility, retained experienced counsel to conduct thorough internal investigations, and has implemented real reforms."  And in the sentencing memo of the government there are repeated references to the extraordinary cooperation of the company.  For example, it states "[t]he reorganization and remediation efforts of Siemens have been extraordinary and have set a high standard for multi-national companies to follow."   The sentencing memo has an incredible description of the internal amnesty program of the company.
  • DOJ has a website that provides the FCPA, a lay person's guide, etc.  A key problem one finds is that because most of the cases are resolved, one is unlikely to find a significant body of reported decisions resolving issues involving companies who were alleged to violate the FCPA.  And as for individuals - the DOJ website lists 2 cases, but notes that they last updated the website in 2004.(here)
  • The plea agreement letter provides for cooperation, but does not call for providing any privileged material -  something that is good to see on the part of DOJ. (See FCPA Blog here)
  • The agreement does limit the ability of the company from disseminating information regarding this matter without first obtaining the approval of DOJ. It states:

"Press Releases: Defendant agrees that if Siemens AG or any of its direct or indirect affiliates or subsidiaries issues a press release in connection with this agreement, defendant shall first consult the Department to determine whether (a) the text of the release is true and accurate with respect to matters between the Department and defendant; and (b) the Department has no objection to the release. Statements at any press conference concerning this matter shall be consistent with this press release."

A waiver of first amendment rights - is the government fearful of the company saying something?  This may explain why the document on the Siemens website - to investors - is extremely brief -Download 20081215_settlement_eng.pdf


Addendum - Jordan Weissmann, BLT Blog, Siemens AG Lawyers View $800 Million Fine As a Victory


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I agree that the FCPA Blog is the "go to" site for the Siemens case. I agree the FCPA Blog that the public comments by Peter Löscher (the press releases, the choreographed interviews) of “Siemens endorses clean business” were a tremendous help to their position. And the Arthur Andersen prosecution in the aftermath of the Enron scandal certainly made the DOJ gun-shy on a full court press.

Löscher has done an admirable job of cleaning up all the corruption issues including the investigation at Com by the Munich Office of Public Prosecution and the final settlement with German tax authorities regarding its questionable payments made under business consulting agreements and under other agreements with third-party intermediaries which resulting in a tax charge (non-deductible by the way) of €179 million. The financial hit to Siemens is far greater than the reported $1.3 billion figure.

But I maintain (as stated in by earlier post on that blog) that the Siemens case is rife with political “behind-the-scenes” issues, and you have confirmed that for me by your comment on the limits put on Siemens from disseminating information regarding the settlement. Have you seen this before in other cases? I have been checking but I can't find such an example.

Siemens is a powerful company, with a dramatic history and more dramatic connections. And Löscher knows he will be tested in the not-so-distant future. Just by reading its recently filed Form 6-K and 4th quarter reports we know Siemens envisions its biggest growth (40%) in the CIS, CES and Africa markets – areas rife with corruption issues.

In the present case, I believe the decision to let Siemens avoid debarment from work on U.S. government contracts (and European contracts if the yet-to-be-published German version comports to the U.S. agreement) just had to be. It was the only outcome. The recent Siemens Iraq contract (announced a day before the FCPA decision), the crucial German support in Afghanistan, the recent disclosure of how German intelligence helped us get into Iraq, etc. just confirms the political decisions that had to be made.

Posted by: Mr Posse | Dec 17, 2008 1:41:27 AM

I agree with Mr Posse (neat name by the way). You hit in on the head. The DOJ gave Siemens a nice cover with its emphasis on "the company confessed" and its details on the proposed/in place compliance program, acceptance of a monitor, agreed fines, etc. All in keeping with the FCPA rule book. When I was with the SEC (in a different capacity) we did that all the time in what I'd call "delicate" cases. Really, the back room politics in many of these cases can be extraordinary. And kudos to the White Collar Crime Prof Blog. A great, great blog.

Posted by: Richard Dassert | Dec 18, 2008 4:37:05 AM

Exactly. It was a plea agreement. Perfect analysis. That limit on the ability of the company from disseminating information peaked my interest straight away. It was heavily mentioned in the German press. I'd love to know what's not to tell. And while I'm not sure I totally buy into the thought that the "political side" won the day and was the key controller per the gentlemen above, it had to be a factor. It was the lead-in for weeks over here.

This was a complex case politics nothwithstanding. Siemens has ried to close out quite a few other legal issues it has had over here. But most comments I have read rely on U.S. media reports of the saga and analysis by U.S. legal pundits (granted, it's your law). But if you had read the German press (and other European press) you would know that it was the sales managers that burned, but not the division managers. Siemens could not afford to loose those managers and their contacts (read: business/sales connections). So profit first, compliance second (modified). Löscher arrived after these decisions were taken but he was wise enough to focus the DOJ on the top-level changes -- the management and supervisory board changes -- and take them off the focus on the lower levels. And I credit Fiske with developing this strategy. A former prosecutor, he would know which way the wind blew. I do agree that the high cooperation level won the DOJ's hearts and minds (big confession, compliance program/monitor, independent internal investigation, etc.) And the Iraq oil-for-food issue got barely a mention.

Great blog, by the way. I am learning a lot of American law.

But if Löscher can fix the latest scandal (Dassault) he should have clear sailing. At least he got the stock up.

Posted by: Peter Catania | Dec 19, 2008 4:50:25 AM

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