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Mon, Nov 27, 2006 - Page 10 News List

Corruption scandals tarnish Germany's clean image

PROBESiemens' alleged links to an embezzlement scandal involving a former Nigerian dictator and a long-running bribery investigation at Volkswagen have shocked many

AFP , FRANKFURT, GERMANY

Some of Germany's best-known and highly respected companies, including Siemens and Volkswagen, have hit the headlines this week in corruption scandals that threaten to tarnish Germany's squeaky clean business reputation.

Perhaps by far the most spectacular was engineering giant Siemens in a vast embezzlement scandal -- with possible links to the late Nigerian dictator Sani Abacha -- that shocked even the most hard-nosed observers.

Prosecutors have arrested a total of seven Siemens employees, both current and former, amid allegations they diverted 200 million euros (US$260 million) of company money into overseas slush funds to pay for major contracts.

The arrests were made after more than 200 police officers, tax inspectors and investigating magistrates raided about 30 offices and homes of Siemens employees and seized some 36,000 documents.

One of the employees has subsequently been released, but six still remain in custody and are currently being questioned by prosecutors.

The employees were "being questioned, some of them a number of times, and a number of statements have been made," a spokesman for the prosecutors said, declining to elaborate further.

A report in the reputable daily Sueddeutsche Zeitung on Friday claimed that one of the men admitted paying massive bribes to the regime of the late Abacha.

It said the former employee told investigators it was common to pay sweeteners in Africa to secure contracts and that he had acted as a middleman, channelling between 75 million euros to 100 million euros a year to Nigeria through bank accounts in Austria in the 1990s.

Abacha is suspected of having looted about US$2.2 billion when he ruled Africa's most populous nation from 1993 until his death in 1998.

The extent of the Siemens scandal surprised even the most seasoned investigators.

"It astonished us," said Peter von Blomberg, the deputy head of the German arm of Transparency International.

"The size of the case begs the question whether corruption is part of Siemens' corporate culture and is knowingly tolerated by management, or whether the company is simply the victim of ruthless managers, acting for their own personal gain," von Blomberg said. "Whatever the answer is, all control systems have clearly failed."

Siemens promised to get tough on wrongdoers amd immediately suspend any employees where suspicions of illegal behavior had hardened.

"We have to relentlessly clarify and punish irregularities. Employees who violate our compliance regulations hurt Siemens in every respect. We cannot tolerate that," chief executive Klaus Kleinfeld said.

A long-running corruption probe at auto giant Volkswagen also returned to the spotlight this week with the arrest of the former head of the group's general works council, Klaus Volkert.

Volkert, who was forced to resign when the affair came to light in the summer of last year, is seen as one of the central figures in a massive bribery scandal that top-pled a number of influential figures, including VW's former human resources chief, Peter Hartz.

The scandal centers on the alleged payment of extravagant bonuses and illegal perks to mem-bers of VW's works council in return for their approval of painful and unpopular restructuring measures.

Another company to hit the headlines was E.ON, Germany's biggest power supplier, which was accused by the EU Commission in Brussels of interfering in a price-fixing probe.

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