The German engineering giant Siemens will pay a record fine of $1.6 billion dollars to settle bribery allegations made by U.S. and European authorities. The company was charged with paying out more than a billion dollars in bribes to win contracts around the world.
In an age where money may just be blips on a computer screen, it can be almost nostalgic to hear about something as old-fashioned as suitcases full of cash. But that's exactly how Security and Exchange Commission officials say some of the Siemens bribes went down.
"Employees obtained large amounts of cash from Siemens cash desks. Employees sometimes carried that cash in suitcases across international borders to pay bribes," Linda Thomsen, SEC director of enforcement, said at a press conference Monday. "Payment authorizations were recorded on Post-it notes that were later removed to avoid leaving any permanent record."
In other words, officials of the German company knew what they were doing was wrong.
Joseph Persichini, head of the FBI field office in Washington, D.C., said, "Their actions were not an anomaly. They were standard operating procedure for corporate executives who viewed bribery as a business strategy."
As a result, Siemens won business contracts all over the world — to build railroads in Venezuela, cell phone systems in Bangladesh, a national ID project in Argentina.
Bribing foreign officials to drum up business violates a law called the Foreign Corrupt Practices Act. The Justice Department has seriously ramped up its FCPA enforcement, and in President Bush's first term, prosecutors brought 17 of these cases. In his second term, there have been 42 cases.
And other countries are playing a much bigger enforcement role than they used to.
"We are now working with our law enforcement colleagues to a degree that we never have previously," said Matthew Friedrich, acting head of the Justice Department's Criminal Division. "In the past, in a case of joint jurisdiction between the United States and another country, it was typically the case that only the U.S. prosecution would succeed. That is now significantly less likely to be the case."
In the Siemens case, the Munich-based company has agreed to pay fines in Germany and the United States totaling $1.6 billion. The U.S. fines alone are 10 times higher than the previous record.
"It is the biggest case around," said Danforth Newcomb, a defense lawyer in New York who specializes in FCPA cases.
Despite the massive fines, Newcomb said Siemens "got a good deal" based on the sentencing guidelines — not only because of the dollar amount the company paid, but also because it didn't technically admit to bribery.
Instead, Siemens officials copped to a lesser charge. This may sound like a technicality, but it can make a big difference, said Drew Harker, a Washington defense attorney who handles these kinds of cases.
"If Siemens the parent corporation had pled guilty to bribery, they would have been more at risk of losing access to the U.S. government contract market, Harker said. Getting shut out of American government contracts could have been a death sentence for Siemens.
That may explain why Siemens agreed to record-setting fines, Harker said.
"It's hard to know what the consequences of debarment or suspension for the U.S. government market would be, but it would certainly dwarf the $1.6 billion that Siemens paid," he said.
Under the agreement, Siemens will pay an independent monitor to oversee the company's behavior for the next four years.
At Monday's press conference, prosecutors were asked why none of the company's top executives had been charged with crimes. Their response: The investigation continues.
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