Tuesday, July 29, 2008

Siemens - corruption scandal

Siemens to sue 11 ex-board members

Siemens on Tuesday announced it planned to claim damages from eleven of its former executive board members, including ex-chief executives Heinrich von Pierer and Klaus Kleinfeld, over their role in the bribery scandal that struck the company almost two years ago.

Europe’s biggest engineering group claimed the managers had ”breached their organisational and supervisory responsibilities”, thus failing to stop illegal practices and wide-ranging bribery in a scandal that could potentially cost the engineering group several billion euros.

Siemens’ supervisory board on Tuesday approved recommendations by Hengeler Müller, the law firm, to sue almost all executive board members in charge between 2003 and 2006.

It will be the first time a chief executive of a company listed in the German blue-chip index Dax has been sued for compensation by his former employer. Mr von Pierer, who as well as Mr Kleinfeld always denied any wrongdoing, was chief executive until 2005 and stepped down as chairman two years later.

Mr Kleinfeld, Mr Pierer’s successor as chief executive, is now heading the US steel group Alcoa. Both managers are also facing civil proceedings by Munich prosecutors on suspicion of failed oversight.

Prosecutors are investigating allegations that Siemens bribed customers around the world to win infrastructure contracts, using slush funds and sham companies.

On Monday, the prosecutors won their first trial in the Siemens’s case in what they interpreted as having a signal effect on the other charges that would follow.

A Munich court had given Reinhard Siekaczek, a former middle-ranking manager, a two-year suspended sentence and a hefty fine.

The supervisory board also decided to sue for compensation two former executive board members, in another case where company money was allegedly being transferred to set up a rival to Siemens’ main trade union IG Metall. One of the managers, Johannes Feldmayer, was recently charged by prosecutors in Nuremberg.

The company on Tuesday also said it planed to spin off SEN, its telecom unit for business clients, into a joint venture with US financial investor The Gores Group.

Siemens said it expects to see a significant negative impact in the current quarter due to the transaction. Chief Financial Officer Joe Kaeser said he would not rule out a high triple-digit million euro hit.

The industrial group has been trying to sell this unit for two years. In the same time SEN has lost lost more than €1bn.

Siemens’ shares were down 0.5 per cent at €72.14 in afternoon trading.

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