Siemens stains spread

Bribery investigations at Siemens have spread to a new division, and the chairman is reported to be trying to get rid of the chief executive.


Bribery investigations at Siemens have spread to a new division, and the chairman is reported to be trying to get rid of the chief executive to save his own skin.

The scandal, which began in the company's telecommunications division, and led to arrests at the giant German company. Despite allegations surfacing in new parts of the company, the AGM passed off peacefully - though the chairman is reported to be trying to get rid of the CEO.

While the chairman was denying responsibility for the known trouble at the AGM, Munich prosecutors were investigating a KPMG document which extended it. The 6 November 2006 report details suspicious payments made to win contracts. More than twenty people were paid €100 million. A lot of cash was moved to United Arab Emirates, Cyprus, Indonesia and Sudan, and its use there is unknown.

The payments were made by the fixed line telecommunications business, and also by a division new to the scandal; Siemens ICM mobile communications business. A sum of €1.7 million went to a Siemens Swiss subsidiary, Intercom Telecommunications Systems during 2005 and 2006. ITS was wound down two months after being raided by prosecutors in March 2006, amid suggestions that its role was to funnel bribes.

Affected divisions

The Siemens divisions implicated in the corruption scandals include the fixed line telecommunications unit, the ICM mobile telecommunications business and the Power, Transmission and Distribution business. With corrupt practices surfacing in three separate divisions, it is becoming harder for the Siemens senior management to deny knowledge of the problem.

If they were not involved, then their financial supervision was slipshod. To be duped by underlings is, at best, slipshod.

At the AGM, Dr. Heinrich v. Pierer, Siemens' chairman, executed a chairman's 2-step dance, when he said: "I deliberately would like to address the doubts that have been expressed about whether I – as Chairman of the Supervisory Board – could in fact give my full support to the (corruption) investigations and its consequences, since a substantial part of the questionable activities took place during the period when I was CEO."

"First: I have already explained that I took major steps during my period as president and CEO to fight corruption. And you can be assured: I am deeply distressed that these efforts were not successful enough. I have therefore pledged my unconditional support to all those who are charged with clarifying the situation."

"And second: I would like to emphasise that responsibility for action in this matter clearly lies in the hands of the Audit Committee, as the bylaws of the Supervisory Board foresee.... In order to avoid any appearance of a conflict of interest, I already proposed in December that I no longer take part in the meetings of the Audit Committee that deal with the compliance issues. ... With this step, I believe the concerns of a conflict of interest have been addressed."

But it is not just about a conflict of interest or giving full support to enquiries. It is about whether the continued role of the current chairman, who was CEO and responsible when the corrupt activities occurred, and ineffective in preventing them.


Astonishingly Der Spiegel reports that Pierer is trying to get rid of the new CEO, Klaus Kleinfeld. Denied by Kleinfeld's spokesman, the rumour surfaced after senior executives outside the company apparently said they had been approached about filling his job.

Such an attempt looks like an effort by the pressurised Siemens chairman to produce a senior enough scalp to get himself and the company off the hook.

Previous Siemens Techworld reports

Previous reports on the developing scandal are listed here:-

Siemens skewered by slush fund scandal - 20 Nov 06
Siemens fraud investigation deepens - 23 Nov 06
Siemens slush fund scandal deepens - 13 Dec 06
Siemens-Nokia joint venture delayed - 15 Dec 06
Siemens faces price-fixing fines - 22 Jan 07
Siemens fined £275m - 24 Jan 07

The joint-venture with Nokia is still supported by both Siemens and Nokia and preliminary moves to form it have been made.

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