Corporate Corruption
November 20, 2006
A massive corruption scandal at the fixed line telecoms unit of the Munich-based engineering and electronics giant Siemens could involve more than 100 million euros ($128 million), according to reports in German weekly Focus magazine over the weekend.
The magazine said in its online edition that investigators had found 40 million euros in the bank account of a Siemens executive in Greece and another 40 million euros in Austria. Even the offices of Siemens chief executive Klaus Kleinfeld have been searched, according to newspaper reports.
Slush fund to bribe contractors
Prosecutors are investigating whether the money was part of a slush fund used to bribe overseas contractors to place orders, including a contract for security systems at the 2004 Olympic Games in Athens.
A former Siemens board member and four other employees were taken into custody following police raids of company headquarters, more than 30 other offices, and in private homes on Wednesday.
The five are among a dozen people suspected of embezzling 20 million euros, according to senior prosecutor Christian Schmidt-Sommerfeld. According to reports in Spiegel Online, two top executives, Michael Kutschenreuter and Andy Mattes, who were board members at Siemens COM, the fixed-line communications division, are among those being investigated.
Raid involved hundreds of inspectors
The raids involved about 270 tax inspectors, police officers and investigating magistrates who searched sites and seized documents at company headquarters as well as in the German city of Erlangen and offices in Switzerland.
The dozen suspects are being investigated for using company money to pay bribes in order to win contracts, channeling cash mainly through Swiss bank accounts, and transferring the embezzled funds to offshore firms via dummy companies.
The German daily Süddeutsche Zeitung reported on Monday that a Siemens spokesperson confirmed the company had known about the accusations for almost a year and had launched its own probe into the corruption scandal.
Siemens appointing ombudsman
On Thursday, Siemens said that it was revising its internal auditing procedures as a result of the affair and was also creating the position of a full-time ombudsman to whom its employees could report any suspected irregularities in the future.
The investigation adds to a difficult period for Siemen, which has been under fire for its perceived role in the collapse of German mobile phone maker BenQ, and is the latest in a series of corruption scandals that have plagued major German businesses recently.
Former Volkswagen board member Peter Hartz, who advised former chancellor Gerhard Schröder over the labor reform package that bears his name, was indicted just last week for sanctioning illegal bonuses paid out to his mistress and former heads of VW's workers' council.