Sunday, December 21, 2008
"First" of the Day: Largest corporate fine
Siemens ... last week ended up paying $1.6 billion in the largest fine for bribery in modern corporate history. —Siri Schubert and T. Christian Miller reporting in "At Siemens, Bribery Was Just a Line Item"
Siemens, according to Wikipedia, is "Europe's largest engineering conglomerate and the largest electronics company in the world.... The company is a conglomerate of three main business sectors: Industry, Energy and Healthcare with a total of 15 Divisions."
The Times story, based partly on an interview with Mr. Siekaczek of the telecommunications unit who authorized the payouts from Siemens headquarters, contains a number of little snippets of interest—
- Concerning the countries where you almost always pay to play—
Afghanistan, Haiti, Iraq, Myanmar and Somalia are the five countries where corporate bribery is most common, according to Transparency International.
- Concerning the countries where Siemens really paid to play—
The S.E.C. complaint said Siemens paid its heftiest bribes in China, Russia, Argentina, Israel and Venezuela.
If we order the countries by their gross domestic product (GDP), we see that Israel, which should be last on the list, got more than its fair share.
- On the extent of the corruption—
What is striking about Mr. Siekaczek’s and prosecutors’ accounts of those dealings, which flowed through a web of secret bank accounts and shadowy consultants, is how entrenched corruption had become at a sprawling, sophisticated corporation that externally embraced the nostrums of a transparent global marketplace built on legitimate transactions.
Matthew W. Friedrich, the acting chief of the Justice Department’s criminal division, called corruption at Siemens “systematic and widespread.” Linda C. Thomsen, the S.E.C.’s enforcement director, said it was “egregious and brazen.” Joseph Persichini Jr., the director of the F.B.I.’s Washington field office, which led the investigation, called it “massive, willful and carefully orchestrated.”
Ms. Thomsen expressed herself more fully on the matter, according to other Times reporters—
Linda Chatman Thomsen ... said that the company paid an estimated $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and Latin America. She called the schemes “unprecedented in scale and geographic reach.”
Siemens seems to have gotten to everybody everywhere except in North America and the Antarctic. Can this be?
Crucially, while Siemens admitted violating the United States Foreign Corrupt Practices Act, it avoided either a guilty plea or a conviction for bribery, allowing it to maintain its status as a “responsible contractor” with the federal Defense Logistics Agency. Without that certification, Siemens could have been excluded from public procurement contracts in the United States and elsewhere. German authorities are preparing a similar certification.
Yep. Siemens appears to be just the sort of company the Pentagon can really do business with. It would be a shame to remove them from the payroll.
- On Siemens' history and business model—
World War II left the company shattered, its factories bombed and its trademark patents confiscated, according to American prosecutors. The company turned to markets in less developed countries to compete, and bribery became a reliable and ubiquitous sales technique.
“Bribery was Siemens’s business model,” said Uwe Dolata, the spokesman for the association of federal criminal investigators in Germany. “Siemens had institutionalized corruption.”
Perhaps the Times didn't want to embarrass anybody about those bombed factories. Wikipedia has the lowdown—
Preceding World War II Siemens was involved in funding the rise of the Nazi Party and the secret rearmament of Germany. During the Second World War, Siemens supported the Hitler regime, contributed to the war effort and participated in the "Nazification" of the economy. Siemens had many factories in and around notorious extermination camps such as Auschwitz and used slave labor from concentration camps to build electric switches for military uses. In one example, almost 100,000 men and women from Auschwitz worked in a Siemens factory inside the camp, supplying the electricity to the camp.
Gerhard Cromme, the chairman of Siemens, has announced that “Siemens is closing a painful chapter in its history.” His words seem to echo what an earlier Siemens chairman must have said as the company prepared to "move forward" after the War.
We can only wonder what a company with this much experience is prepared to do next.
The heavy American involvement in the first three countries on the list doesn't seem to have raised the tone. I hope we haven't been setting a bad example.