Lawyers for German conglomerate Siemens AG are celebrating a victory of sorts, despite pleading guilty in federal court yesterday to corruption charges and getting slapped with $800 million in fines.
While steep, the penalty is significantly lower than what is recommended by the federal sentencing guidelines, and represents the culmination of two years of close cooperation between Siemens’ lawyers and U.S. investigators.
Over the course of this decade, Siemens and several of its international subsidiaries spent roughly $1.4 billion bribing foreign government officials in order to win lucrative development contracts, according to the government’s complaint filed in the U.S. District Court for the District of Columbia. The kickbacks played a role in projects as varied as the Iraqi Oil for Food Program, the construction of a new Venezuelan rail system, and the production of a national identification card in Argentina.
When the charges came to light in 2006, Siemens, which is listed on the New York Stock Exchange and thus subject to U.S. oversight, decided to try and “end the case as quickly as possible and at the least possible cost,” said
Peter Solmssen, the company’s general counsel. Siemens hired Debevoise & Plimpton to carry out a massive internal investigation, while retaining Scott Muller and Robert Fiske from the Washington office of Davis Polk & Wardwell to handle its criminal defense.
The fast action from Siemens helped win good will from both the Securities and Exchange Commission and the Justice Department. Prosecutors calculated that under the normal sentencing guidelines, Siemens would ordinarily owe between $1.35 billion and $2.7 billion in fines. But according to the Justice Department’s sentencing memorandum, “The scope of Siemens’ internal investigation was unprecedented and included virtually all aspects of its worldwide operations, including headquarters components, subsidiaries, and regional operating companies.”
The company's lawyers helped track complex, international financial transfers and dug through decades of company records to speed the investigative process along. The assistance, as well as steps the company took to remedy its corrupt practices, convinced prosecutors to knock their suggested fine down to $450 million. That figure was then added to the $350 million owed to the SEC.
The choice to use an independent investigator was key to Siemens’ success, Solmssen said.
“There are some companies I don’t want to name that got out to the wrong foot by not using an independent investigator and instead tried to use a management investigation,” he said.