Risk Management

Siemens Study Finds Rampant Abuses

Law firm hired by scandal-plagued German conglomerate says its investigation was aided by amnesty program, and finds no evidence that audit committ...
Stephen TaubApril 29, 2008

A prominent international law firm hired by scandal-plagued Siemens AG to investigate bribery and corruption charges dating back to the late 1990s found evidence of violations of domestic and foreign compliance regulations.

Debevoise & Plimpton LLP’s report says many of the violations were due both to corruption and violations of regulations that govern internal controls and the accuracy of documentation.

The report, delivered to the German conglomerate’s compliance committee, covered business transactions between 1999 and 2006, and management conduct related to those practices.

The law firm says that the company’s amnesty program, which expired at the end of February, had generated significant new facts.

A number of former managers of Siemens have been accused of bribery and fraud. Countries investigating violations involving Siemens include the U.S., Switzerland, Italy, Greece, China, Hungary, Israel, Russia, Norway and Indonesia, according to the Associated Press.

The report describes “a wide range of shaded areas between doing everything right, passing the buck, no reaction or not reacting properly or fast enough, and possible participation in non-compliant activities.”

By the same token, Debevoise stresses that there is no new incriminating information and no substantive allegations to call into question the supervisory board’s recommendation to ratify the actions of the members of the Siemens managing board in its composition as of May 1.

“Specific conclusions are not yet possible and…it is too early to make a decision on specific consequences in relation to individuals from the circle of former board members,” the report states. Debevoise also notes that no instances emerged that would suggest that the audit committee has tolerated reported violations in any way.

In a June 2007 interview with CFO magazine, Siemens chief financial officer Joseph Kaeser, just one year into the job, asserted, “We will get to the bottom of everything and clean it up.” He also said that all conduits for potential bribery payments have been closed.

“There’s a whole set of actions we had to take immediately [to fix] where the company was not compliant … [For example,] we had some 5,000 decentralized accounts,” he told the magazine. “We centralized all the payment systems worldwide, made sure that every transaction goes through one system [and] that there is always a liability booked before a payment is made … There are a whole bunch of other actions that we reported in our 6K filing … [But] those conduits have definitely been closed.”