In August 1990, the U.N. adopted Security Council Resolution 661, which prohibited U.N. member-states from transacting business with Iraq, except for the purchase and sale of humanitarian supplies. In April 1995, the U.N. adopted Security Council Resolution 986, a limited exception to Resolution 661 which allowed Iraq to sell its oil so long as the proceeds from oil sales were used by the Iraqi government to purchase humanitarian supplies for the Iraqi people. The U.N. controlled the proceeds from all sales of Iraqi oil and approved payments to suppliers of humanitarian goods. This program became known as the Oil for Food Program ("OFFP"). Beginning in approximately August 2000, the Iraqi government demanded that suppliers of humanitarian goods pay a kickback, usually valued at 10% of the contract price, to the Government of the Republic of Iraq in order to be awarded a contract by the government. Suppliers often caused the U.N. to unknowingly fund these improper kickbacks by including the cost of the kickbacks in the contract price.
Siemens Aktiengesellschaft (“Siemens”) was a corporation organized under the laws of Germany with its principal offices in Berlin and Munich, Germany, and, through its operating groups, subsidiaries, officers, directors, employees, and agents, was engaged in a variety of business activities for, among others, national, state, and municipal governments. This included, among other things, developing, constructing, selling, and servicing telecommunications equipment and systems; power generation, transmission, and distribution equipment and systems; transportation equipment and systems; medical equipment and systems; and industrial and traffic equipment and systems. Siemens was organized in a matrix-like structure with both operating groups and regional companies, organized by location. The functions of operating groups and regional companies often overlapped, though each operated independently with minimal, if any, centralized reporting mechanisms beyond financial reporting. Over 1,800 legal entities operated as part of the Siemens group of companies. As of March 12, 2001, Siemens' stock was listed on the New York Stock Exchange.
From about March 12, 2001 to about 2007, Siemens made payments totaling approximately $1,360,000,000 through various mechanisms in a variety of countries. Of this amount, approximately $554,500,000 was paid for unknown purposes, including approximately $341,000,000 constituting direct payments to business consultants. The remaining $805,500,000 of this amount was intended in whole or in part as corrupt payments to foreign officials.
In addition, from about 2000 to about 2002, Siemens France, Siemens Turkey, Osram Middle East, and GTT, each wholly owned by Siemens or one of its subsidiaries, were awarded 42 contracts with a combined value of more than $80,000,000 with the Ministries of Electricity and Oil of the Government of the Republic of Iraq under the OFFP. To obtain these contracts, at the demand of these ministries, the relevant Siemens entities caused to be paid as much as $1,736,076 in kickbacks to the Iraqi government, and they collectively earned a gross profit of over $38,000,000.
On December 12, 2008, the DOJ filed a two count Information in the District of Columbia against Siemens alleging knowing and willful violations of the books & records and internal controls provisions of the FCPA. On December 15, 2008, Siemens entered into a Plea Agreement with the DOJ. Under the terms of the agreement, Siemens pleaded guilty to both counts and agreed to five years of organizational probation, to pay a criminal monetary fine of $448.5 million plus a mandatory assessment of $800, and implement enhanced anti-corruption compliance policies and procedure, including the hiring of an independent monitor for a term of four years. The fine was substantially below the minimum fine determined under the sentencing guidelines. In agreeing to such a substantial departure from the guidelines range, the DOJ took into consideration Siemen's assistance in the investigation of other individuals and organizations, its payments of fines or disgorgement in other related proceedings both in the U.S. and in Germany, its substantial compliance and remediation efforts, and its extraordinary rehabilitation.
