Enforcement Action

 

Docket or Case Number:    08-cr-00367

Court:    District of Columbia

Initiation Date:    12/12/2008  Information

Prosecuting Agency:    US Department of Justice

Name of Prosecuting Attorneys:   

  • Steven A. Tyrrell, Acting Chief, Fraud Section, Criminal Division
  • Mark F. Mendelsohn, Deputy Chief, Fraud Section, Criminal Division
  • Lori A. Weinstein, Trial Attorney, Fraud Section, Criminal Division
  • Jeffrey A. Taylor, United States Attorney
  • John D. Griffith, Assistant United States Attorney

Assisting Agencies:    Undetermined , U.S. Securities and Exchange Commission , Federal Bureau of Investigation , Internal Revenue Service , Munich Public Prosecutor's Office

Type of Action:    DOJ Criminal Proceeding

Origin of the Proceeding:    Foreign investigation, Voluntary disclosure

Whistleblower:    Unknown

Case Status:    Resolved


Summary

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 organizationla 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.

Country(ies) involved:    Iraq

Sanction to Bribe Ratio:    N/A

Sanction to Revenue Ratio:    N/A

Sanction to Profit Ratio:    N/A

Number of Related Enforcement Actions (Including This Enforcement Action):    8

Country(ies) involved:    Argentina, Bangladesh, China, Iraq, Israel, Mexico, Nigeria, Russia, Venezuela, Vietnam

Total $ Bribery Payments:    $1,400,000,000

Total $ Revenue Generated from Bribery:    N/A

Total $ Profit Earned or Expenses Avoided from Bribery:    $1,100,000,000

Total $ Monetary Sanctions:    $801,858,957

Sanction to Bribe Ratio:    $801,858,957 / $1,400,000,000 = (57.28 %)

Sanction to Revenue Ratio:    N/A

Sanction to Profit Ratio:    $801,858,957 / $1,100,000,000 = (72.90 %)

Name:    Siemens AG

Place of Incorporation:    Germany

HQ Country(ies):    Germany

Entity Type:    Public Company

FCPA Claims:    Internal Controls, Primary, Knowing Violation (15 U.S.C. § 78m(b)(5)) ; Books & Records, Primary, Knowing Violation (15 U.S.C. § 78m (b)(5)) ; Books & Records, Primary, Issuer [Willful] (15 U.S.C. § 78m (b)(2)(A); 15 U.S.C. § 78ff(a)) ; Internal Controls, Primary, Issuer [Willful] (15 U.S.C. § 78m (b)(2)(B); 15 U.S.C. § 78ff(a))

Related Claims:    N/A

Statutory Basis for FCPA Jurisdiction:    Issuer ; Person (Books & Records, Internal Controls)

Period of Bribery:   2000 - 2007

Total Bribery Payments:    N/A

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Iraq

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Officials; Organization N/A
  • Name N/A, Officials; Iraqi Ministry of Electricity
  • Name N/A, Officials; Iraqi Ministry of Oil
  • Name N/A, Officials;

Defendant-Related Entities Involved in the Misconduct:    Former Siemens Communications operating group - Division/Branch Office ; Gas Turbine Technologies S.p.A. - Subsidiary ; Osram Middle East FZE - Subsidiary ; Siemens Industrial Solutions and Services operating group - Division/Branch Office ; Siemens Medical Solutions operating group - Division/Branch Office ; Siemens Power Generation operating group - Division/Branch Office ; Siemens Power Transmission and Distribution operating group - Division/Branch Office ; Siemens regional company in South America - Subsidiary ; Siemens S.A.S. of France - Subsidiary ; Siemens Sanayi ve Ticaret A.S. of Turkey - Subsidiary ; Siemens Transportation Systems operating group - Division/Branch Office ; Various Siemens entities - Subsidiary ; Various Siemens regional companies - Subsidiary

Third-Party Intermediary:   

  • Business consultants , Agent/Consultant/Broker
  • Oil For Food Program Agent A , Agent/Consultant/Broker
  • Oil For Food Program Agent B , Agent/Consultant/Broker
  • Oil For Food Program Agent C , Agent/Consultant/Broker
  • Oil For Food Program Agent D , Agent/Consultant/Broker
  • Siemens Power Generation operating group , Agent/Consultant/Broker
  • Unnamed intermediary entites , Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    Cash (bills/coins/etc.), Wire Transfer, Check/Bank Draft

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Siemens' systematic efforts to circumvent internal controls and falsify books and records

Period of Bribery:   2000 – 2007

Total Bribery Payments:    $805,500,000

Total Revenue Generated from Bribery:    N/A

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    N/A

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Officials; ;
  • Name N/A, Officials; Organization N/A,

Defendant-Related Entities Involved in the Misconduct:    Former Siemens Communications operating group - Division/Branch Office ; Siemens Industrial Solutions and Services operating group - Division/Branch Office ; Siemens Medical Solutions operating group - Division/Branch Office ; Siemens Power Generation operating group - Division/Branch Office ; Siemens Power Transmission and Distribution operating group - Division/Branch Office ; Siemens regional company in South America - Subsidiary ; Siemens Transportation Systems operating group - Division/Branch Office ; Various Siemens entities - Subsidiary ; Various Siemens regional companies - Subsidiary

Third Party Intermediary:    Business consultants - Agent/Consultant/Broker
Unnamed intermediary entites - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    Cash (bills/coins/etc.), Wire Transfer, Check/Bank Draft

Purpose of Bribe:    N/A

TRANSACTION OVERVIEW
Siemens' involvement in the U.N. Oil For Food Program

Period of Bribery:   2000 – 2002

Total Bribery Payments:    $1,736,076

Total Revenue Generated from Bribery:    $80,000,000

Total Profit Earned or Expenses Avoided from Bribery:    $38,000,000

Country(ies) involved:    Iraq

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Officials; Iraqi Ministry of Electricity;
  • Name N/A, Officials; Iraqi Ministry of Oil;

Defendant-Related Entities Involved in the Misconduct:    Gas Turbine Technologies S.p.A. - Subsidiary ; Osram Middle East FZE - Subsidiary ; Siemens Power Generation operating group - Division/Branch Office ; Siemens Power Transmission and Distribution operating group - Division/Branch Office ; Siemens S.A.S. of France - Subsidiary ; Siemens Sanayi ve Ticaret A.S. of Turkey - Subsidiary

Third Party Intermediary:    Oil For Food Program Agent A - Agent/Consultant/Broker
Oil For Food Program Agent B - Agent/Consultant/Broker
Oil For Food Program Agent C - Agent/Consultant/Broker
Oil For Food Program Agent D - Agent/Consultant/Broker
Siemens Power Generation operating group - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    Cash (bills/coins/etc.), Wire Transfer

Purpose of Bribe:    Obtain/retain business

Misconduct by Subsidiary?  Yes


Parent(s):   Siemens AG

Subsidiary:  Siemens S.A.S. of France

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Siemens Sanayi ve Ticaret A.S. of Turkey

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Osram Middle East FZE

  • Percentage of Ownership:    N/A
  • Direct or Indirect Ownership:    Indirect
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Gas Turbine Technologies S.p.A.

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    No
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     No

Re: Siemens AG

  • Inadequate internal controls or auditing
  • Inadequate safeguards concerning use of third parties

Mitigating Factors Referenced by the Government (Company Defendants):

Defendant Self-Report Cooperation Voluntary Remedial Measures Misconduct Limited to Low Level Individuals Other factors
Siemens AG      

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
Siemens AG    

Total Monetary Sanctions for the Action:    $448,500,800

Case Status:    Resolved


Disposition:    Plea Agreement

Date of Disposition:    12/15/2008

Siemens AG

—  Total Monetary Sanctions for Defendant:    $448,500,800

—  Organizational Probation:    60 months

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Independent monitor

—  Admission of Guilt/Acceptance of Responsibility:    Yes

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