Infineon Management Knew About Scandal
July 19, 2005
"After a careful assessment of the results of our investigations so far, the suspicion that payments were made has been confirmed," the prosecutor said in a statement, according to Reuters.
Andreas von Zitzwewitz (photo), one of the chipmaker's most valuable managers, resigned over the weekend following allegations that he had taken up to 259,000 euros in kickbacks for arranging motor sports sponsorship deals (like the Infineon Raceway, above, in California) with a Swiss PR firm. A former colleague of his, Harald Eggers, is under investigation for accepting up to 50,000 euros. Neither has commented on the affair.
Top managers knew early on
German financial and criminal police investigators raided 15 properties in Switzerland and Germany in connection with the bribery probe over the weekend. The corporate scandal is the second one to rock Germany following revelations of staff improprieties carmaker Volkswagen that led to the resignation of personnel chief Peter Hartz.
Infineon managers, specifically chairman of the board Max Dietrich Kley and former chairman Ulrich Schumacher (photo), apparently knew about the affair as early as April 2004, when Udo Schneider, the chief of the Swiss PR firm BF Consulting, informed Schumacher about the payments to von Zitzewitz and Eggers. Schneider now denies he ever did that.
Berlin's Tagesspiegel, relying on confidential sources, reported Tuesday that Kley held off conducting an investigation because he needed von Zitzewitz, the head of Infineon's core memory-chip unit, to help him oust Schumacher. On Monday, Kley said that he launched an internal investigation into the kickbacks that came up empty.
A valuable asset
"As long as there was no proof of the accuracy of the allegations against Dr. von Zitzewitz … the supervisory board could only decide in favor of the accused," Kley told the Frankfurter Allgemeine Zeitung.
Infineon stock has taken a dive as a result of revelations. Shares closed down 1.2 percent at 8.31 euros on the blue-chip DAX index yesterday.
"I'm very concerned," Uche Orije, a semiconductors analyst at JP Morgan told Reuters. "We have very high regard for Mr. von Zitzewitz. This is someone who's been quite central in putting Infineon on the map in terms of technology."
Von Zitzwitz had been with the company since 1988, when it was still a part of Siemens AG. Since being promoted to upper management in 1999, he has headed the company's manufacturing strategy and its fight to dethrone leading chipmaker Samsung Electronics.
Employees disappointed, not surprised
Former Infineon manager Eggers, now the interim chief executive of Swiss technology group Unaxis after resigning from the company last year, has not commented on the accusations.
Representatives of Infineon workers say they are disappointed, but not surprised by the revelations, given the recent scandals surrounding German managers.
"It's incomprehensible how people who make a lot of money anyway can let themselves be corrupted in such a way," Klaus Luschtinetz, the head of the company's employees committee, told the Tagesspiegel.