Siemens to pay fines in criminal probe

German industrial giant Siemens agreed Monday to pay a record $800 million to settle U.S. criminal charges stemming from what federal authorities say was a systemic campaign of bribing foreign officials for lucrative contracts.

The Munich company also agreed to pay about $540 million to settle similar charges in Germany, which started the investigation in 2006. Both U.S. and German officials said that current and former Siemens executives still could face criminal charges in the continuing international corruption investigation.

“The scope of the bribery scheme is astonishing, and the tone set at the top of Siemens was a corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company,” said Linda Chatman Thomsen, director of the Securities and Exchange Commission’s enforcement division, which also filed and settled a civil action.

From the 1990s through 2007, Siemens executives sent emissaries around the globe to pay off influential government officials in China, Venezuela, Argentina, Bangladesh and other nations to get contracts for transportation, telecommunications and other massive infrastructure projects worth billions of dollars, Justice Department officials said.

Federal authorities disclosed the details of Siemens’ far-flung activities at a news conference here, several hours after a federal judge approved a complex plea agreement by Europe’s largest engineering company. The parent company and several subsidiaries conceded participating in the long-running criminal scheme in varying degrees, a plea that authorities said allows the company to remain eligible for many U.S. contracts.

“We’re very pleased to have this painful chapter in our history closed,” said Peter Solmssen, Siemens’ general counsel. “And we are very pleased that our two-year effort to remediate our problems with corruption have been rewarded.”

The company didn’t admit to bribery, pleading guilty instead to a two-count criminal complaint accusing it of violating the Foreign Corrupt Practices Act’s internal controls and bookkeeping provisions. Three subsidiaries pleaded guilty to conspiracy charges.

Siemens, whose shares are traded on the New York Stock Exchange, agreed to pay $450 million for the violations and an additional $350 million to settle the SEC’s civil claims that the company bribed foreign officials to win $1.1 billion in contracts.

The corrupt-practices law applies to foreign companies through an agreement between the U.S. and its major trading partners. The law requires those whose securities are listed on U.S. exchanges to comply with its accounting provisions and certain anti-bribery provisions.

For the SEC, the settlement is at least 10 times larger than the previous record settlement of a corruption case involving a corporation and foreign governments, Thomsen said.

She said the pattern of bribery by Siemens was unprecedented in scale and geographic reach, involving more than $1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and the Americas. Authorities would not say whether the investigation was targeting any past or present U.S. officials.

Altogether, Siemens has paid more than $1.6 billion in fines to settle related cases, including about $275 million to German authorities last year.

Acting Assistant Atty. Gen. Matthew Friedrich said the plea agreements “make clear that for much of its operations across the globe, bribery was nothing less than standard operating procedure for Siemens.”

Siemens corporate executives used a clandestine network of slush funds, shadowy intermediaries and consultants armed with suitcases full of cash to win some government contracts and to ensure the continuance of others, according to court filings unsealed in Washington.

They hid their activities through a complex series of off-the-books accounting procedures, including using removable Post-It notes to hide the identity of executives who had authorized illicit payoffs, the documents showed.

Siemens lawyer Solmssen said the company’s intensive cooperation with the German and U.S. governments was instrumental in helping it avoid potentially far more serious penalties.

Such cases of corruption, authorities said, are especially damaging to countries forced to use scarce national resources to pay for desperately needed government infrastructure projects, which often cost more because there is no competitive bidding.

“Corruption is not a gentleman’s agreement where no one gets hurt,” Friedrich said. “People do get hurt. And the people who get hurt the worst are often residents of the poorest countries on the face of the Earth.”

The investigation started in 2006, when nearly 200 German law enforcement agents got a tip about widespread corruption at Siemens and raided numerous offices and homes.

The FBI deployed agents from a Washington squad specially trained in foreign corruption cases to work with German authorities, said Joseph Persichini Jr., an assistant FBI director. He said agents found a “massive, willful and carefully orchestrated criminal corruption scheme.”

“Their actions were not an anomaly,” Persichini said. “They were standard operating procedures for corporate executives who viewed bribery as a business strategy.”

Asked why, despite such strong statements, the government had not charged Siemens with bribery or gone after its corporate executives, Friedrich said the company had cooperated fully in the investigation, engaged in significant reforms and hired a former German finance minister as an independent compliance monitor for the next four years.

“In this case, one weighed all the factors,” he said. “This was the right disposition. And the court agreed with our proposal.”

Simeon M. Kriesberg, a lawyer at Mayer Brown, said the Siemens case was the most concrete proof to date that the Justice Department and the SEC had made enforcement of the corrupt practices law a priority, and that they were taking the necessary steps to investigate and prosecute cases jointly with their foreign counterparts.

Over the last five years, Kriesberg said, there have been more such prosecutions and enforcement actions, stiffer penalties and more targeting of individuals and companies.

“I’m sure this settlement is going to send shivers down the spines of boards of directors and senior managements of corporations around the world,” Kriesberg said.

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josh.meyer@latimes.com