Wed, Dec 24, 2008 - Page 9 News List

Where bribery was just a line item

Three decades after Congress passed a law barring US companies from paying bribes to secure foreign business, law enforcement agencies around the world are bearing down on major enterprises

By Siri Schubert and T. Christian Miller  /  NY TIMES NEWS SERVICE , MUNICH, GERMANY

ILLUSTRATION: MOUNTAIN PEOPLE

Reinhard Siekaczek was half asleep in bed when his doorbell rang early one morning two years ago.

Still in his pajamas, he peeked out his bedroom window, hurried downstairs and flung open the front door. Standing before him in the cool, crisp dark were six German police officers and a prosecutor. They held a warrant for his arrest.

At that moment, Siekaczek, a stout, graying former accountant for Siemens AG, the German engineering giant, knew that his secret life had ended.

“I know what this is about,” Siekaczek told the officers crowded around his door. “I have been expecting you.”

To understand how Siemens, one of the world’s biggest companies, last week ended up paying US$1.6 billion in the largest fine for bribery in modern corporate history, it’s worth delving into Siekaczek’s unusual journey.

A former midlevel executive at Siemens, he was one of several people who arranged a torrent of payments that eventually streamed to well-placed officials around the globe, from Vietnam to Venezuela and from Italy to Israel, according to interviews with Siekaczek and court records in Germany and the US.

What is striking about 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.

Siekaczek says that from 2002 to 2006 he oversaw an annual bribery budget of about US$40 million to US$50 million at Siemens. Company managers and sales staff used the slush fund to cozy up to corrupt government officials worldwide.

The payments, he says, were vital to maintaining the competitiveness of Siemens overseas, particularly in his subsidiary, which sold telecommunications equipment. “It was about keeping the business unit alive and not jeopardizing thousands of jobs overnight,” he said in an interview.

Siemens is hardly the only corporate giant caught in prosecutors’ cross hairs.

Three decades after Congress passed a law barring US companies from paying bribes to secure foreign business, law enforcement authorities around the world are bearing down on major enterprises like Daimler and Johnson & Johnson, with scores of cases now under investigation. Both companies declined comment, citing continuing investigations.

Albert Stanley, a legendary figure in the oil patch and the former chief executive of the KBR subsidiary of Halliburton, recently pleaded guilty to charges of paying bribes and skimming millions for himself. More charges are coming in that case, officials say.

But the Siemens case is notable for its breadth, the sums of money involved, and the raw organizational zeal with which the company deployed bribes to secure contracts. It is also a model of something that was once extremely rare: cross-border cooperation among law enforcement officials.

German prosecutors initially opened the Siemens case in 2005. US authorities became involved in 2006 because the company’s shares are traded on the New York Stock Exchange. In its settlement last week with the Justice Department and the Securities and Exchange Commission, Siemens pleaded guilty to violating accounting provisions of the Foreign Corrupt Practices Act, which outlaws bribery abroad.

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